Property expert shares £50 tip to save £8,000 on your mortgage

Homeowners can save thousands of pounds on their mortgages by overpaying their loans by just £50 a month - but there are certain factors to "watch out for", an expert has said.

Teaming up with Barratt Homes to talk about the nifty savings tip, Terry Higgins, group managing director at The New Homes Group, said: "Overpaying your mortgage can be a smart move if you have the money to do so. It helps reduce your mortgage balance while also cutting down on the total interest you'll pay over the life of the loan. Take someone with a £200,000 mortgage at a 5% interest rate over 25 years. Paying just an extra £50 a month could save around £8,000 in interest and shorten the mortgage term by one year and 10 months."

He added: "Increase that overpayment to £200 a month, and you could repay the mortgage in 19 years, saving over £30,000 in interest."

While this is generally a good idea, Mr Higgins warned there are a few things to "watch out for" before overpaying. One key factor to consider is whether your mortgage agreement has an overpayment limit.

Mr Higgins said that most mortgage providers will charge an Early Repayment Charge (ERC) if you exceed your agreed limit.

He said: "While most lenders allow you to overpay up to 10% per year penalty-free, always check with your provider to understand your specific terms.

"It's also worth considering any other high-interest debts, such as credit cards or personal loans, before prioritising mortgage overpayments. You don't want those debts eating into your savings for too long."

Some argue that people should put the extra money into savings rather than mortgage repayments. However, Mr Higgins said the deciding factor depends very much on an individual's financial goals, interest rates, and current situation.

Mr Higgins said: "If your mortgage interest rate is higher than what you'd earn from a savings account, overpaying may save you more in the long run. It reduces the total interest you'll pay and can help you become mortgage-free sooner.

"However, if your mortgage rate is low and you don't yet have an emergency fund - typically three to six months of living expenses - it may be more sensible to focus on saving first. A savings buffer offers flexibility and protection in case of unexpected costs."

He added: "A balanced approach can also work well. Build up a basic savings buffer, then consider regular or occasional mortgage overpayments, depending on what your lender allows without triggering an ERC."

How do I know if paying my mortgage off early is a good idea?

Paying off your mortgage early can offer peace of mind and significant interest savings; however, Mr Higgins said it's not a "one-size-fits-all" solution.

The property expert said it "could be a good idea" if:

• You're not subject to hefty ERCs
• You've already built up an emergency fund
• You're not carrying high-interest debt (e.g. credit cards)
• You're confident you won't need the funds for other major expenses.

However, he noted: "If repaying early means draining your savings, losing out on investment growth, or incurring charges, it may not be the most financially efficient route.

"Speak to a mortgage advisor or financial planner to explore your options and weigh the opportunity cost of early repayment against other uses for your money."