What does Overpayment mean?

Flexible mortgages might allow you to make overpayments towards your mortgage, without having to pay any early redemption penalty for that. You can very nicely shorten the term of your mortgages and also significantly reduce the amount which usually goes towards paying interest only. Thus, you definitely save yourself some extra money.

But you might ask yourself what happens when you cannot afford to make overpayments? Usually nothing, that is why it is called flexible mortgage type. You just make the necessary minimum monthly payments, and when you can afford, you make overpayments.

Another positive side of mortgages allowing overpayment is that these usually allow underpayment as well; depending on how much you have on overpayments, there are months you are allowed to pay less than the minimum required. Last but not least, where overpayment is made as an option, you can also benefit from the drawdown facility. This means, that you can actually borrow back from the amount you have overpaid; thus, if an emergency calls for it there is no need to re mortgage or find another lender.