CML: Protect equity with mortgage overpayments

Date:Tuesday 27th January 2009
Author: Rachel Fletcher

Mortgage holders can help protect equity in their homes on a short-term basis by making overpayments where possible, the Council of Mortgage Lenders (CML) has stated.

Spokesperson Bernard Clarke explained that, while borrowers can expect to gain equity throughout the mortgage's duration, house price falls in the current period can cause equity to decline.

Overpaying "is a way of protecting their equity in the short-term," he said.

Mr Clarke said that while the decision of whether to overpay needs to be considered in light of individual circumstances, if it can be done then it can help pay off more of the capital.

In addition, he said that people on interest-only mortgages might switch to a capital repayment deal for long-term benefits.

Mortgage holders repaid £2 billion on their mortgages in the three months to June last year, figures from the Bank of England show.

In the next quarter, to September, they paid back £5.7 billion.