Overpaying your mortgage. Is this good? asks London Mortgage Advice Wednesday, 9th December 2009

This year has seen a big rise in people making overpayments on their mortgage and it’s a trend that is likely to continue into 2010, with interest rates having been at an all-time low for most of 2009,

One bank has just revealed a 56% year on year increase in the number of its customers making mortgage overpayments. The research coincided with a new pilot scheme that allows borrowers to make capital repayments of up to 50% of their mortgage without penalty.

It’s an interesting step and it’s good to see a lender highlighting the benefits to its customers of making overpayments.

Overpaying is a good option for some of that spare cash if you’re on a variable mortgage and have seen your monthly payments shrink over the last year or so. By paying your mortgage off quicker, you can save yourself a considerable amount of interest over the life of your loan.

If unable to get a decent new deal due to lower house prices, then overpaying can help further as it allows you to reduce the amount you owe and therefore increase the amount of equity in your property.

Check how much your lender will allow you to overpay without incurring a penalty. Typically, lenders will allow you to overpay up to 10% of your mortgage balance, but some are more generous – and if you’re paying your lender’s Standard Variable Rate, there’s a good chance that there’s no restriction on how much you can overpay.