With the Bank of England base rate at an historically low level, this could be a great time to start making overpayments on your Buy-to-Let mortgage. If you are on a variable interest rate you will have seen your monthly payments fall dramatically since September 2008, so you could use some of the money you have saved or any surplus rental income you are currently generating to overpay your mortgage. The current low base rate environment cannot last forever, so you could be prudent and take advantage now to improve your financial position in the future.
Three good reasons to overpay your mortgage
1. Save money
All overpayments reduce your mortgage balance and therefore the interest you are charged over the term of your mortgage. Even small overpayments can add up and make a big difference to the total amount of interest that you pay.
2. Protect your equity
With depressed and falling house prices, making overpayments can help protect the equity in your property by reducing your Loan to Value (LTV) ratio. By doing this you may be able to access better deals from other lenders in the future.
3. Give yourself a buffer
With interest rates likely to rise in the future, overpaying will reduce the balance of your mortgage, so even though interest rates may increase if you have a sufficient overpayments balance your monthly payments may not.
There are two ways you can overpay
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Regular monthly overpayment – a set amount you pay each month over and above your standard mortgage payments. The sooner you start making overpayments, the greater the benefit you’ll see.
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One-off capital repayment – a single mortgage payment that permanently reduces your mortgage balance. The sooner you make a capital repayment, the sooner you benefit in the amount of interest you’ll save.
Like to know how much you could save?
Try our online calculator. Simply enter your mortgage type, the outstanding balance, current interest rate, remaining term and the amount you think you can afford to overpay. Whether it’s monthly or a one off payment, you might be surprised how much a small amount can make a difference.
Make overpayments
Launch our overpayments calculator
Please note: The calculator assumes your current interest rate will remain the same over the period. In reality, interest rates will rise and fall and this will affect the amount you overpay..
Things to think about
1. Early Repayment Charges.
Depending on your mortgage, you may be liable to pay an Early Repayment Charge (ERC) if you make an overpayment. To find out if this applies to you, please call us or check the terms of your mortgage.
GREAT NEWS!
We are currently waiving all Early Repayment Charges until further notice. Find out more.
2. Accessing the money you’ve overpaid in the future.
If you make a one-off capital repayment to your mortgage, you will not be able to draw back this money again.
If you make regular monthly payments you may be able to access these payments in the future if you need them, depending on the type of overpayment method you have as a Buy to Let mortgage customer.
Please contact us to find out about the overpayment methods available to you.
3. Making sure you’re not overstretched.
While there are clear financial benefits to overpaying your Buy to Let mortgage, you should not overpay more than you can afford and always consider the alternative uses for your money. If you have other outstanding debts, like credit cards or personal loans, consider if it would be better paying these off first – especially if the interest you are being charge on them is higher than your mortgage. If you have any queries, we recommend you speak to an independent financial advisor.
Next steps
We offer a range of different overpayment options. To find out what is best for you, please contact us.
Most of our Buy to Let mortgage customers are also be eligible for a specific overpayment facility called Choices that can potentially give you a number of flexible options in the future. If you are, it will be mentioned in your original mortgage offer. Find out more about Choices.