Overpaying your mortgage, particularly now when interest rates are low and therefore mortgage payments have decreased for those on tracker mortgages, could reap rewards in the long-term by substantially knocking down the amount of interest that you pay in total on your mortgage.

The base rate has tumbled and those who overpay their tracker mortgages may find the interest they pay over the term of their mortgage is significantly reduced. Home owners with a mortgage of £150,000 may have seen their mortgage payments fall by as much as £500 a month over the last year leaving them with £500 extra money per month.

By using this ‘extra’ money to overpay the mortgage, it reduces the mortgage debt and also reduces the interest paid on that debt. When rates go up, the interest will be calculated on a smaller balance. The term of the mortgage will therefore either be decreased, or monthly payments will be reduced. If you do overpay your mortgage and you get into trouble later on down the line, mortgage companies are far more likely to allow you to take a ‘payment holiday’ for a few months so paying a little extra in each month is no bad thing.

If you had a mortgage for £150,000 at a rate of 4% and you overpaid by £2.50 a day, you would pay your mortgage off three years and four months early, saving you £13,517 in interest.

The only thing to watch for is some lenders stipulate that you can only overpay by a certain percentage each year, so check your terms and conditions to make sure that you don’t put too much money into the mortgage.

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