I have just made my first EVER automated mortgage overpayment! I am age 44 and for the very first time in my mortgaged life of 20 years I have made a £74 overpayment and am on my journey to saving interest payments and reducing my mortgage term. This process has been made super easy and simple by using the new app Sprive, download the Apple version here or the Android version here, (Get £5 for free when you set up the Sprive app using my code MUMPENNY) to save and make those over payments for me.
I get very excited when I am introduced to new apps in the personal finance world that are doing something different. Sprive is absolutely doing this. There are so many budgeting app, auto savings apps, bill optimisation apps but I have never seen anything that facilitates mortgage overpayments.
How do you Feel about Over-Paying Your Mortgage?
Personally, this is something that I have always struggled with. For much of my adult life I have stretched myself with my mortgage, borrowing large amount of money over as long a period as possible to keep my monthly payment at an affordable level. Overpaying this large amount has felt too much. Or is it really too much? Is this just a mindset thing?
My Mortgage Maths
The maths of the returns I get on my investments versus the cost of my mortgage have always been at the forefront of my mind. My mortgage rate is 1.39%, this is so much lower than the % returns I am getting on my pension and my stocks and shares ISA where even prudently one could assume a return of 5%, but more like 8% on average each year over the last three years.
But its also worth looking at the interest charges in £. Some numbers from the last year with my mortgage that I have taken from my annual mortgage statement. Have a look at your annual mortgage statement and do the same!
My starting balance was £326,934 (I did say my mortgage was a scary number). A 25-year term remains on my mortgage.
I have paid off £10,355 from my mortgage balance in the last year, but I have made monthly mortgage bill payments of £14,832. This means that in just one year I have paid a HUGE £4,477 in interest. Mortgages are a hugely lucrative product for banks!
Seeing this interest payment amount is scary and I’m keen to reduce the amount of interest that I am paying to Santander by as much as is comfortable. This can be done by mortgage overpayment.
Hence I set up Sprive – Mortgage Overpayments made simple
Sprive is a very simple app that will make regular auto-savings for you from your nominated current account and will then make mortgage overpayments for you.
The set-up process was super simple, just a few stages to set up my mortgage account details and then my current account using open banking technology. I then needed to make one phone call to my mortgage company to ensure that they would treat all my extra transfers as over payments and to keep my monthly payment the same. Most mortgage companies allow you to overpay your mortgage by up to 10% per year without penalty, but this should be checked.
I then needed to set up my monthly payment boundaries. I went prudent with savings of between £25 and £100 per month. Sprive will auto save an amount each week based on my current account balance and spending levels. This means that some weeks I save £25, other week its less of a saving. My savings then build up in my Sprive account and when I am ready to make the mortgage over payment I hit the lender payment button, and everything is processed for me.
One of the things I love about the app is its flexibility.
That I can let my auto-savings build up in savings and withdraw it back to my current account if I really need the money that month. This flexibility was great over the past few months, I have been trialling Sprive since early 2022 but only felt ready to make the mortgage overpayment this month for the first time.
There is also useful information based on your actual mortgage balance and interest rate on what your mortgage over payment actually mean and what difference they can make to your interest payments and term of mortgage.
If I overpaid by just £25 each month I would reduce my mortgage term by 7 months and save £1,400 in interest. Moving this overpayment up to £100 per month would reduce my mortgage term by 2 years 2 months and save £5,200 in interest payments. This information is available in the auto-save tab, its worth setting up the app to understand the saving that can be made by overpaying your mortgage.
The Benefits of Using Sprive for Overpayments versus Do It Yourself
It has always been possible to make manual overpayments to a mortgage, but this requires a decision and some action every time you make an overpayment. Sprive automates this decision and transaction, meaning it is more likely to happen. Just keep chipping away at that mortgage and pay it off sooner than your original term.
The dashboard of the app and the tracking of progress is simple to understand, and all the information is there in the palm of your hand in the app. All of your mortgage information in the app, mortgage balance and even the value of your property is kept updated so you always know your equity % ownership.
An app that automates a process that saves me money and that is Free is a definite winner for me. You can read more about the benefits of Sprive versus DIY overpayments here.
How Does it Feel to Overpay you mortgage? And to Pay Off your Mortgage?
I have many friends who are in this fortunate position to have paid off their mortgage, and many who are working towards paying off their mortgage via overpayments. They say it feels amazing, such a feeling of freedom to know that the ultimate asset, their house, is 100% theirs and cannot be taken away. And the freedom from that monthly payment is there. It’s very much on the way to financial freedom with no debt payments (even good debt) being made.
There are many benefits to overpaying your mortgage and paying it off early. Firstly its tax free saving at a rate much higher than you would get from a saving account at the moment. The bigger equity to loan ratio the better the mortgage rate you can get when choosing a mortgage deal. And you will save more if you overpay now versus later as interest is front loaded more towards the beginning of a mortgage product. You can read more about the benefits of paying off your mortgage early here.
Set up Sprive and get a £5 thank you gift
As a special gift to you when you set up the app using my code of MUMPENNY you will get a £5 credit to your account. To qualify for the gift, you just need to add in your mortgage account detail and link up your nominated account that you want your mortgage over-payments to be take from. Simple. Then sit back and watch your mortgage balance reduce with over payments.
This is a collaborative post with Sprive.