Usually more than people expect. On a £200,000 repayment mortgage at 4.5% over 25 years you would pay £133,499 in interest if you never overpaid. An extra £200 a month cuts that by £36,280 and clears the mortgage more than six years early. The earlier you start, the more it helps, because each overpayment lowers the balance your monthly interest is charged on.
Use It as a Mortgage Early Repayment Calculator Want to be mortgage free by a certain age, or before the children leave school? Try different amounts until the mortgage free date matches your goal. The chart shows how quickly your remaining balance falls with and without the extra payments, and the results show how much interest you keep in your pocket.
Check Your Overpayment Allowance First Most lenders let you overpay up to 10% of your outstanding balance each year without an early repayment charge while you are on a fixed or tracker deal. The calculator checks your first 12 months of overpayments against that limit. Charges above it are typically 1% to 5% of the extra amount, depending on your lender and how long is left on your deal.
Regular Monthly Overpayments, Lump Sums or Both You can add a regular monthly overpayment, a one off overpayment, or both. A lump sum overpayment from a bonus or inheritance works hardest when it goes in early, while regular overpayments are easier to budget for and can usually be stopped if your circumstances change. Choose to shorten your term or lower your monthly payment and the results update straight away.
Mortgage overpayment guide
Every pound you pay off early stops being charged interest straight away, which is why overpaying is one of the simplest ways to cut the cost of your home. I am asked about it most weeks, usually by clients coming up to a remortgage or with a bonus sitting in the bank. The mortgage overpayment calculator shows the numbers. This guide explains the rules lenders set, how to make an overpayment and when it may not be the right move.
Money you pay above your normal monthly payment comes straight off the capital you owe. Most UK lenders work out interest daily or monthly on the outstanding balance, so a lower balance means less monthly interest from that point on. Unless you ask for something different, most lenders keep your mortgage payments the same and the mortgage ends sooner. Some recalculate a lower payment instead, especially after a lump sum, so tell your lender which you prefer.
On a fixed, tracker or discounted deal, most lenders let you overpay up to 10% of your balance each year without an early repayment charge. On a £250,000 mortgage, that is a maximum amount of £25,000. Some lenders measure the limit per calendar year, some from the date your deal started, and a few offer unlimited overpayments. Go over the limit and you may incur a charge of 1% to 5% of the excess. Once you move to the lender's standard variable rate, there are normally no restrictions.
Both reduce your interest, and the sooner the money goes in, the bigger the effect. A one off payment suits a bonus, an inheritance or a matured savings account. A regular monthly overpayment is easier to budget for and simple to amend or cancel. As an example, a £10,000 lump sum on £250,000 at 4.5% with 25 years left cuts the total interest by £19,584 and takes 1 year and 9 months off the term.
Keeping your payment the same and shortening the term of your mortgage reduces the most interest. Asking for a lower monthly payment gives your budget more room, but the interest benefit is smaller. With the same £10,000 on £250,000, the lower payment option brings the payment down from £1,389.58 to £1,334.00 a month and cuts total interest by £6,675. Use the toggle in the calculator to compare both for your own mortgage.
Each example is based on a capital repayment mortgage at 4.5% for the whole term, with overpayments starting now. Your rate will change when your deal ends, so enter your own details in the calculator above.
Most lenders make it simple. Log in to your mortgage account online or through the lender's app (you may need to register first), select the option to make an overpayment, then choose a one off payment or set up a regular monthly overpayment. You can also pay by debit card over the phone or by transfer from your online banking. Some lenders hold overpayments in separate sub accounts, so check your next statement to make sure the remaining balance has fallen by the right amount.
Compare your mortgage rate with what your savings earn after tax. If they pay less, overpaying usually wins on the numbers, but money paid into a mortgage is hard to get back. I would want an emergency fund of three to six months of spending in place first, dearer debts such as credit cards cleared, and pension contributions considered. An offset mortgage can give you much of the benefit while keeping access, which you can test with our offset mortgage vs savings calculator.
If your fixed rate ends within a few months, it can pay to wait and overpay at the end of the deal, when there is no early repayment charge and a lower balance could move you into a cheaper loan to value band. Our loan to value calculator shows where the next band starts. It is also worth pausing if you plan to borrow more soon, as any new lending is assessed again from scratch.
On an interest only mortgage, an overpayment reduces the loan and your monthly interest, but it will not shorten the term. It does reduce what you need to repay at the end. The calculator assumes a capital repayment type, so speak to us if you want figures for interest only or part and part. Landlords often keep cash for empty periods and repairs rather than overpay a buy to let.
Is it worth overpaying my mortgage? Usually, if your mortgage rate is higher than the after tax rate on your savings, you have an emergency fund and you have no dearer debts. Every overpayment lowers the interest you pay for the rest of the term. It is less worthwhile if the money would do more clearing a credit card or going into a pension with employer matching.
How much can I overpay without a penalty? Most UK lenders allow up to 10% of your outstanding balance each year during a fixed or tracker deal. Some allow more and a few allow less. On a standard variable rate there is normally no limit, but always check the terms and conditions of your own mortgage first.
Does overpaying reduce my monthly payment? Not automatically. Most lenders keep your payment the same and shorten the term, which reduces the most interest. You can usually ask for a lower payment instead, particularly after a lump sum.
Can I get my overpayments back? Only if your lender offers a drawdown or reserve facility, and many do not. Treat overpayments as spent. If you might need the money, an offset mortgage or a savings account is usually a better home for it.
Does overpaying help when I remortgage? It can. A lower balance means a lower loan to value, and dropping below a threshold such as 75% or 60% can open up cheaper rates. The end of a deal is also the best time to pay a large lump sum, because you will not pay an early repayment charge.
How does this mortgage early repayment calculator work? It works out your monthly payment from your balance, rate and remaining term, then runs your mortgage month by month with and without your overpayments. The difference in total interest and remaining months is the benefit shown in your results. It is based on the assumptions listed under the calculator, so treat the figures as a guide.
