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There has been much talk of a revival in the city, with the traditional bonuses set to rise dramatically from last year. Indeed, one in four city employees surveyed are expecting to receive upwards of double the amount they did for 2004.
Charcolonline.co.uk is showing consumers how overpaying on their mortgage can have a very positive effect on their finances, but warns that borrowers must know the conditions of overpayment.
Not many will be looking forward to the bonus levels Goldman Sachs employees will receive but even modest bonuses used correctly can drastically reduce the total amount you will pay on a mortgage.
Ray Boulger of charcolonline.co.uk comments: "Most borrowers will have the ability to overpay their mortgage without incurring any early repayment charges (ERCs), and some may not be aware of this."
The most common amount which can be overpaid, without incurring ERCs, is 10% per annum, but some allow 5% or unlimited overpayments, all of which allow a large chunk of the mortgage to be overpaid. However, borrowers must be aware of any conditions when overpaying as breaching any terms could result in a large penalty. Ray Boulger advises, "Always check with your lender before making an additional payment."
In addition to allowing some ERC-free overpayments, some mortgages are fully flexible and allow overpayments to be re-borrowed. Such a facility will allow large bonuses to be parked in the mortgage, thus saving interest, until needed for any large expenditure during the following year.
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Examples - The savings to be made on even modest overpayments are impressive: |
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Mortgage size |
Bonus amount |
Savings realised |
Years cut from term |
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Scenario 1 |
£300,000 |
£20,000 |
£35,300 |
2 years, 8 months |
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Scenario 2 |
£250,000 |
£15,000 |
£26,700 |
2 years, 6 months |
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Scenario 3 |
£200,000 |
£15,000 |
£26,500 |
3 years, 1 month |
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Scenario 4 |
£150,000 |
£5,000 |
£9,000 |
1 year, 4 months |
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Scenario 5 |
£100,000 |
£2,500 |
£4,684 |
1 year, 1 month |
"Whilst making one overpayment on a mortgage has a clear benefit in the long-term, those who choose to use some of their bonus each year to overpay on their mortgage will naturally see an even bigger effect," said Mr Boulger.
Charcolonline.co.uk costs just £5 to join and has a host of mortgage wizards enabling users to work out exactly how much an overpayment could save them over the term of their mortgage. The site contains details of many exclusive deals, and generic ones, including a range of the best flexible mortgages.
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