Pay Now, Spend Later

MILLIONS of homeowners are missing out on a golden opportunity to lighten the load of their mortgage.

They should be taking advantage of the lowest interest rates for nearly 40 years to pay off their mortgage more quickly and SAVE money.

Instead they are using the rising value of their homes to BORROW more and go on an unprecedented spending spree. Some of that money is being spent on home improvements, which could add value to the property. But as Kirstie Allsopp and Phil Spencer, both right, of Channel 4's Location, Location, Location programme warn below, some improvements are better than others. Ray Boulger, of mortgage brokers Charcol, reckons it's a better idea to save on your mortgage by increasing the monthly payments. That way you pay off the debt more quickly and save lots of dosh-which you can then spend later on home improvements, holidays or cars.

But watch out for penalties-depending on your type of mortgage you could have to pay a charge for overpaying.

However there are a number of lenders who will allow you to overpay typically up to 10 per cent a year without penalty. Thankfully they include most of the big names such as the Halifax, Woolwich, Nationwide, Cheltenham and Gloucester, and Abbey National.

Some lenders won't let you overpay at all, but there is a wheeze for getting round it. Ask them to shorten the term of your mortgage instead-there is usually a small admin charge of Pounds 50 or so.

"With interest rates so low this is people's best opportunity for 40 years to overpay by increasing the amount of their monthly payments and so shorten the period of their mortgage, saving themselves thousands of pounds," says Mr Boulger.

Some of the examples of the massive savings to be made by early repayment are shown below-and the easiest way to overpay is to take out a flexible mortgage.

These may be slightly more expensive. but allow you to overpay, underpay or even take a payment holiday without penalty.

And if you have the current account type of flexible mortgage-where you also have a savings account with the same lender-your savings are taken into account when it comes to working out how much interest you owe on your mortgage.

HOME IN ON THE RIGHT CHANGE

BRIGHT IDEAS

* ADDING extensions, conservatories and large kitchens pays off.

* MAINTAINING your property regulary preserves its value.

* CREATING space with loft or cellar conversions will add value.

* RESTORING original and period features can add thousands.

* REVAMPING your fitted kitchen cheaply with new doors and handles.

* REPLACING an outdated avocado or pink bathroom with a new white suite.

NOT THE RIGHT IDEAS

* SWIMMING pools, Jacuzzis and saunas rarely return their outlay.

* EXPENSIVE gadgetry such as electric garage doors.

* ADDITIONS out of keeping with the house's original design, such as stone cladding.

* OBSTRUCTIONS that ruin the natural lines of the house.

Related links:

1. Householders rush to cash in on bargain rates: REMORTGAGING: Sabuhi Mir looks at those people releasing equity, thanks to historically low interest levels, and what they are doing with the money
2. Householders rush to cash in on bargain rates: REMORTGAGING: Sabuhi Mir looks at those people releasing equity, thanks to historically low interest levels, and what they are doing with the money
3. Householders rush to cash in on bargain rates: REMORTGAGING: Sabuhi Mir looks at those people releasing equity, thanks to historically low interest levels, and what they are doing with the money