Sprive has welcomed Leeds Building Society’s new 98% loan-to-value mortgage but says borrowers should have a long-term strategy to reduce their mortgage debt through regular overpayments.
Leeds Building Society has launched a new 98% loan-to-value mortgage designed to help more first-time buyers onto the property ladder with a deposit of as little as 2%.
The lender’s Start Mortgage is available on a five-year fixed rate of 5.65% and requires a minimum deposit of £5,000. That means a buyer purchasing a £250,000 property could secure a mortgage with a £5,000 deposit.
While the product lowers one of the biggest barriers to homeownership, mortgage overpayment app Sprive says buyers should also consider how they will reduce their borrowing over the longer term.
According to Sprive, a borrower with a £245,000 repayment mortgage could make substantial savings through relatively small monthly overpayments. Paying an additional £30 each month could save £10,185 in interest and reduce the mortgage term by one year.
“Increasing the overpayment to £50 a month could save £16,403 in interest and shorten the term by one year and seven months, while an extra £100 each month could save more than £30,000 in interest and allow the mortgage to be repaid three years earlier.
Jinesh Vohra, chief executive of Sprive, said: “For many first-time buyers, saving a deposit is the biggest obstacle to homeownership, so products like this that reduce the upfront cost could make a real difference. But while a smaller deposit helps people get on the ladder sooner, it also means borrowing more and starting out with very little equity.
“With many first-time buyers already taking out longer mortgage terms to keep monthly repayments affordable, it’s more important than ever to think beyond simply getting approved for a mortgage. Even small overpayments made from day one can knock years off the mortgage term and save tens of thousands of pounds in interest over the life of the loan.
“The key is to have a strategy to reduce the debt as your finances improve. Whether that’s using cashback from everyday spending or setting aside small amounts each month, starting early can make a huge difference to both the total interest paid and how quickly you become mortgage-free.
“At Sprive, we help homeowners make overpayments part of their everyday finances, whether through automated savings or cashback earned from everyday spending, making it easier to chip away at their mortgage without having to make big lifestyle changes.”
Sprive’s platform allows homeowners to make regular mortgage overpayments through features including Auto Save and Shop with Sprive, which provides cashback on everyday spending at retailers including Tesco, Sainsbury’s, Asda, M&S and Waitrose. Cashback is paid directly towards a customer’s mortgage.
The company said a household spending £500 a month on groceries through Shop with Sprive could save up to £7,000 in mortgage interest and repay their mortgage eight months earlier, without increasing overall spending.
Vohra said: “Overpayments of just £30 or £40 a month can save thousands of pounds and knock months, or even years, off a mortgage term. The average Sprive user is on track to save around £8,000 in interest and become mortgage-free 17 months earlier.
“For many households, finding extra money each month isn’t easy. That’s why we’ve built features that help people overpay in a way that works with their budget — including earning cashback from everyday spending and automatically adjusting overpayments when finances are tighter.”
