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Bonuses should be ploughed into mortgage
29 January, 2008
Most of us try to 'start as we mean to go on' in January but Charcol is advising borrowers not to lapse when it comes to mortgage overpayments.
January bonuses are 'crucial' to mortgage repayments according to the lender who believes that every penny does indeed count.
Katie Tucker of Charcol has highlighted the importance of resisting temptation when it comes to blowing the bonus after spending January on a tight budget.
She said that borrowers should consider the thousands they will save by clearing a chunk of their mortgage before they splurge in the sales.
“You should always pay off your most expensive debts first, as these are charging you most per pound every month," advised Tucker.
“Many people receive a 2 per cent increase in salary in line with inflation - on a £35,000 salary this works out to around £50 extra per month after tax.
“Mortgage lenders normally allow total repayments of up to £500 monthly, or 10 per cent of the debt, and for most the interest will be recalculated immediately.
"Simply overpaying an extra £50 per month will bring a £150,000 25-year repayment mortgage down from 25 years to 22 years, saving a whopping £17,415 on the cost of the mortgage over the term."