Sprive Mortgage Overpayment Application: Is It Good?
A new app says it will be easier for people to make regular mortgage overpayments, saving thousands in interest and getting off their mortgage faster.
Sprive was founded by former Goldman Sachs banker Jinesh Vohra, who took inspiration from the struggles he had trying to pay too much for his own mortgage.
He said he found the process confusing and spent hours figuring out how much he was reducing his total balance each time he overpaid and what he was saving in interest charges.
Sprive app lets users make mortgage overpayments based on spending
“When I bought my first house with my wife, we borrowed £ 330,000, and I calculated that for £ 1 we would pay 50p in interest,” he explains.
“It made sense to overpay, especially since I wouldn’t earn much interest on the money I saved if I put it in a bank account with such low interest rates.
“But six months later, I realized that the overpayments were not having the benefits I expected. Instead of reducing my overall debt, the payments were used to lower my monthly payments – keeping the mortgage term and interest owed the same. ‘
Sprive claims to demystify this process, by calculating the overpayments a user can afford each month and paying them to their bank.
If their bank has a minimum threshold for overpayments, Sprive may place funds in a deposit account until that number is reached and payment can be made.
The app also provides them with a running total of the percentage of their home they own, the total amount of their debt, and when they can expect to pay it off.
As they continue to overpay, they will see both of those numbers decrease over time, which means they could get off their mortgage faster.
Sprive gave the following example of how the app works:
Of interest? Homeowners Can Reduce Interest Payments By Overpaying Their Mortgage
The app works the same as business apps like Moneybox and Plum, which monitor user spending and set aside a certain amount each month based on what they can afford.
But instead of wasting the money on a rainy day, Sprive will divert it to overpayments on the user’s mortgage.
To do this, customers will need to link their bank account to the app and agree to share their spending data, along with their mortgage account details. Sprive is currently free.
Customers can choose a minimum and maximum limit each month, and the app will use artificial intelligence technology to determine how much to pay. This amount can be adjusted if the user wishes.
He says he “never stores or has access to bank login information.”
The Sprive app lets users see how much time they have to pay off their mortgage, as well as how much interest they could potentially save by paying earlier.
“The algorithm looks at the individual’s spending,” Vohra explains. “If they spent that month it will take something close to the minimum amount, but if they have been reasonable and saved more it will take the maximum.”
While users can choose to have money leave their account automatically, the default setting allows them to manually approve payment first.
It’s the first app of its kind that is stand-alone, rather than being provided by a mortgage lender.
Although regulated by the FCA, Vohra says it does not provide financial advice, but gives borrowers the tools to better understand their mortgage and make informed decisions about overpayment.
The app currently works with HSBC, Lloyds, Barclays, Santander, RBS, Virgin Money, Halifax, Natwest, Yorkshire Building Society, Accord Mortgages and TSB Bank.
I hope to reduce the term of my mortgage from 20 to 12 years
Indi Rai used the Sprive app to cut the time it took to pay off her mortgage on her house in Bedfordshire
Indi Rai, 34, a marketing manager from Bedfordshire, uses the pilot version of the Sprive app to make mortgage overpayments on the house he has shared with his wife for almost a year, after hearing about it on social networks.
He says, “I had been thinking about overpaying for a mortgage for a while, but it was always difficult to get information from my bank on how I might do it.
“I never had time to pick up the phone and talk to someone.
“The Sprive app was very easy to set up and I love that my payments go instantly to my mortgage account, so there is no waiting for it to be completed.
“Before using Sprive, I had a hard time determining the effect of any overpayments on reducing my mortgage term – but now it’s easy to see exactly how long I can withdraw.
“I think I will have paid off my mortgage in about 12 years, rather than the 20-30 I expected when I took it out.”
However, users will need to be clear about any restrictions on how much they can overpay.
While people on their lender’s standard variable rate can normally overpay without penalty, people on fixed rate or tracking offers may be subject to annual limits set by their bank or mortgage company.
This is typically about 10 percent of the mortgage balance on a fixed product. Some trackers often have a 25 percent limit, but others allow refunds without penalty.
Is Overpayment on Your Mortgage Right for You?
While the temptation may be to overpay the home loan in order to try and become “mortgage-free” sooner rather than later, there are likely a number of other financial considerations involved.
For example, debt elsewhere – if you have it, the money you could potentially embezzle to pay your mortgage overpayment could be better served there?
Do you have an emergency savings stamp? Would it make more sense to increase the amount you pay into a private pension? Where to invest?
It all depends on your personal situation and is not always perfectly clear.
They will also want to know about their lender’s prepayment charges, which penalize homeowners who pay off their loan before the end of the term.
It is only worth paying them if you will save more than the amount of interest charges by paying off sooner.
Homeowners should also consider the impact of inflation on their future mortgage amount and whether they will save money in the long run.
As Katie Brain, mortgage expert with independent financial advisory service Defaqto, explains, “It’s worth considering whether it’s worth paying too much for your mortgage right now.
“You have to ask yourself if the extra cost you are paying now, in money today, is worth it to save an amount in the future that will be considerably less in real terms.
“For example, if your current mortgage rate is less than 2% (which is very much the case) but inflation is 4% (which is the case), then if your wages keep up with inflation, it doesn’t it doesn’t make sense to pay. the mortgage now.
“Don’t worry, not having a mortgage – even if it’s very small – is a huge comfort to people and can be worth it for the peace of mind. “
While it does not plan to charge its customers for using the app, Sprive hopes to make money in the future by recommending cheaper mortgage deals to them and taking a commission from lenders when they do. change, like a traditional mortgage broker.
“Ultimately, we want to create a tool where we analyze the market 24/7 for better mortgage deals and help users change, like a Uswitch for mortgages,” Vohra explains.
Expert opinion: check the lender’s terms and conditions
This is Money asked Katie if paying too much for a mortgage using an app like Sprive is a good idea, and what users need to watch out for.
“This new overpayment app sounds like a great idea because you can link your bank account to it and help pay off your mortgage faster,” she said.
“However, there are a few things to keep in mind.”
She offered the following tips for overpaying with Sprive:
- Always check the terms and conditions of your mortgage, as the amount you can pay off per year without penalty varies. Typically, for a fixed rate mortgage, providers allow 10 percent per year without any penalties, sometimes up to 25 percent for trackers, or no penalties at all.
- Some lenders base the amount that can be overpaid on the monthly payment amount, so it is important to check to avoid such penalties.
- Some lenders have a minimum amount that you can repay, for example £ 500, so you may have to wait until you have saved enough to make an overpayment.
- If you have additional “sub-accounts”, this is where you may have borrowed additional funds. It’s worth checking the interest rate for each sub-account, as it would usually be a good idea to pay off the larger portion of the mortgage first.
- Think about what you want the overpayment to do; reduce the monthly payment or reduce the duration. If you want to reduce the term, the lender will likely need to be contacted to apply it.
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