Property & Mortgages
See how much interest and time you save by making regular overpayments on your mortgage.
Most lenders allow up to 10% of balance per year penalty-free
Interest saved
£22,936
Pay off 4 years earlier
| Without overpayment | With overpayment | |
|---|---|---|
| Monthly payment | £1,265.30 | £1,465.30 |
| Total interest | £103,672 | £80,735 |
| Mortgage term | 20 years | 16 years |
| You save | £22,936 |
Calculating a new mortgage?
The Mortgage Calculator shows monthly payments, total cost, and a full amortisation schedule.
Mortgage CalculatorOverpayment Guide
Mortgage interest is calculated on the current outstanding balance each month. Every overpayment permanently reduces that balance, which means less interest is charged the following month, and every month after that for the rest of the term.
Because interest compounds on the balance, the savings from an early overpayment grow over the full remaining term. £100 overpaid in year one saves more than £100 overpaid in year ten, because the earlier saving has longer to compound. On a £200,000 mortgage at 4.5%, overpaying £200 per month saves around £26,000 in interest and clears the mortgage over four years early.
Most fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Exceeding this triggers an early repayment charge (ERC), typically 1% to 5% of the excess amount. Variable and tracker rate mortgages are usually more flexible. Always check your mortgage terms before making large overpayments, and if you have significant savings to deploy, consider waiting until the fixed period ends.
Overpaying your mortgage gives a guaranteed return equal to your mortgage interest rate. If your rate is 4.5%, every pound overpaid saves 4.5% per year in future interest, risk-free. Whether this beats investing depends on your expected investment returns, tax position, and attitude to risk. For most people, a balanced approach works well: maximise any employer pension match first, then split remaining surplus between overpaying and investing.
Most lenders apply overpayments to the balance and keep your regular payment the same, which shortens the term. This is usually the best outcome financially. Some lenders allow you to formally recalculate to a lower monthly payment instead. Reducing the payment helps cashflow but saves less interest overall, because you will be paying for longer. If you have breathing room, keeping the payment level and shortening the term is the more efficient choice.