Calculate how much you can save with mortgage overpayments
When you make a mortgage overpayment, the extra money goes directly towards reducing your outstanding mortgage balance. Because interest is calculated on the remaining balance, a smaller balance means less interest is charged each month. This creates a compounding effect — as the balance falls faster, an increasing proportion of each subsequent regular payment goes towards capital rather than interest.
For example, on a £200,000 repayment mortgage at 4.5% over 25 years, your standard monthly payment would be approximately £1,111. If you overpay by just £200 per month, you could save over £28,000 in total interest and pay off your mortgage around 5 years early. Even small, regular overpayments can make a meaningful difference over the life of a mortgage.
Most fixed-rate and tracker mortgages allow you to overpay up to 10% of your outstanding balance each year without incurring early repayment charges. This allowance typically resets on the anniversary of your mortgage, not the calendar year.
If you overpay more than your annual allowance, early repayment charges (ERCs) apply only to the amount exceeding the limit, not the entire overpayment. Use our ERC calculator to check the cost.
If you are on your lender's standard variable rate (SVR), there are typically no limits on overpayments and no early repayment charges. This makes the SVR period an ideal time to make large lump sum overpayments.
Some lenders offer higher overpayment allowances of 15% or even 20%. Always check your mortgage offer document or contact your lender directly. The allowance is a key factor to consider when choosing a mortgage product.
Setting up a regular monthly overpayment is the most effective approach for most homeowners. Even £100-£200 per month can make a substantial difference over the life of your mortgage. The key advantage is consistency — the interest savings compound month after month, and it becomes part of your normal budgeting.
Tip: Set up a standing order for the day after payday so the overpayment happens automatically before you can spend the money elsewhere.
Making a one-off lump sum overpayment can be effective when you receive a bonus, inheritance, or other windfall. The earlier in the mortgage term you make a lump sum payment, the more interest you will save. Remember to check your annual overpayment allowance first to avoid triggering early repayment charges.
Example: A £10,000 lump sum overpayment on a £200,000 mortgage at 4.5% with 20 years remaining could save approximately £8,500 in interest and reduce the term by over a year.
Some lenders give you the option of how overpayments are applied: you can either keep your monthly payment the same and reduce the mortgage term, or keep the term the same and reduce your monthly payment. Reducing the term saves the most interest overall, while reducing the payment provides more monthly breathing room.
Best approach: If your finances allow, opt to reduce the term. This maximises your interest savings and gets you mortgage-free sooner.
Before committing to regular overpayments, ensure you have considered the following:
This calculator provides estimates for general guidance. Always check your specific mortgage terms and consider seeking independent financial advice before making large overpayments.
Related: Learn about remortgaging strategies, mortgage planning, and offset mortgages.