Have you taken mortgage repayment leave and should you be paying too much now to make up for it?

Homeowners in financial difficulty as a result of the pandemic who took a mortgage payment vacation could get back on track with their loan using a new app.

Speed ​​Up My Mortgage is a cash back offer that rewards you when you spend online at any of its retail partners including eBay, Marks & Spencer, Boots, ASOS, B&Q, Currys PC World, AO, Vodafone and Pizza Hut.

Rather than accumulating in your bank account, the cashback accumulates in your application account and when the balance reaches £ 50, this amount will be automatically refunded to your mortgage lender. The service launched last year, but the app is new, making it easier for mobile purchases to qualify for the program.

Lee Flavin, co-founder of Mortgage Consultant Ratesetter and Accelerate My Mortgage, said: “An estimated 2.5 million homeowners took advantage of the mortgage repayment holiday offer during the pandemic, but the consequence is that these borrowers now find themselves further away from mortgage freedom than they were before the pandemic.

“We have decided to launch the app to help close the gap for homeowners who have seen their mortgage payments and overall balances increase in recent months due to taking a payment holiday during Covid-19.”

Paying too much for your mortgage is usually a good idea, as it shortens the term of the loan, thereby reducing the amount of interest you owe. For those who have taken paid time off due to time off or other financial pressures in the past 12 months, this is worth considering, as the “vacation” is actually overwhelming you more. of debts.

Based on a typical mortgage with an outstanding balance of £ 150,000, on a fixed rate of 2.5% with 20 years remaining to pay off and monthly payments of £ 795, a hefty £ 312.50 of interest will take been added to the loan for each month of payment leave.

If six months’ payment holiday had been taken you would have accrued £ 1,875 in interest, bringing your new balance to £ 151,875 and your monthly payments at the end of the holiday to £ 821.

“Mortgage interest is typically calculated daily, which means interest stops being the overpayment amount the very next day,” says Flavin.

“In other words, every £ 1 overpaid can be worth a lot more because of this multiplier effect.”

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The service is free and open to all mortgage owners in the UK – whoever your lender and wherever you are during the term of your mortgage – even if you are currently in a fixed rate period, although you still have to check with your lender. to avoid triggering a prepayment charge.

Most fixed rate and fixed-term tracking rate mortgages have a limit on how much you can overpay each year – typically 10% of the outstanding balance.

“Our mission is to help homeowners across the UK achieve mortgage freedom faster,” added Mr Flavin. “And at the same time, help them bounce back by eliminating the significant additional costs they have incurred as a result of the pandemic.”

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