How much can you reduce your mortgage by overpaying?
On a £250,000 mortgage over 25 years at 4.5%, overpaying £100 a month saves about £21,900 in interest and clears the loan 2 years 10 months early. £200 a month saves about £38,500 and 5 years 1 month. £500 a month saves about £70,800 and 9 years 8 months. Enter your own figures above to see your version of this.
| Extra each month | Total payment | Interest paid | Interest saved | Mortgage clear in | Time saved |
|---|---|---|---|---|---|
| Nothing | £1,390 | £166,874 | — | 25y 0m | — |
| £50 | £1,440 | £155,125 | £11,749 | 23y 6m | 1y 6m |
| £100 | £1,490 | £145,004 | £21,871 | 22y 2m | 2y 10m |
| £200 | £1,590 | £128,416 | £38,458 | 19y 11m | 5y 1m |
| £300 | £1,690 | £115,359 | £51,515 | 18y 1m | 6y 11m |
| £500 | £1,890 | £96,043 | £70,831 | 15y 4m | 9y 8m |
Notice that the saving grows faster than the overpayment. Doubling £50 to £100 nearly doubles the interest saved, but going from £100 to £500, five times the money, saves more than three times as much and takes nearly four times as long off the term. That is because each extra pound shortens the period over which every remaining pound of balance accrues interest.
One-off payments work the same way. A single £5,000 paid now saves about £10,100 and ten months; £10,000 saves about £19,600 and 1 year 9 months; £25,000 saves about £45,000 and 4 years 2 months.
How much extra should you pay on your mortgage?
As much as you can sustain after keeping an emergency fund, taking any employer pension match, and clearing debt that costs more than your mortgage. An overpayment earns you your mortgage rate, risk-free and with no tax to pay on the benefit, so the comparison is that rate against what the same money would earn elsewhere after tax.
In practice the order that settles it is rarely about rates:
- Keep three to six months of outgoings in cash first. Money paid into a mortgage is very hard to get back out, and a lender will not return it because your boiler failed.
- Take any employer pension match before overpaying. A match is an immediate return no mortgage rate competes with.
- Clear anything more expensive than the mortgage. Credit cards and car finance usually cost several times the rate, so a pound there is worth several pounds here.
- Then compare rates honestly. If your mortgage is 4.5% and savings pay 4% before tax, overpaying wins. If savings pay 5.5% in an ISA, it does not. Check which side you are on rather than assuming.
A regular standing order you never think about generally beats a larger amount you keep meaning to arrange. Starting at £50 and raising it when something changes costs nothing and is far more likely to still be running in five years.
How much extra can you pay on your mortgage?
During a fixed-rate deal most UK lenders let you overpay 10% of the balance each year without penalty. On a £250,000 balance that is £25,000 a year, or about £2,083 a month. Go beyond the allowance and an early repayment charge applies. Once the fixed period ends there is usually no limit at all.
The charge is typically a percentage of the amount repaid and tiered so it falls as the fixed period runs down. Five per cent in year one, 4% in year two and so on is a familiar shape. It is why overpaying up to the cap is such a common strategy: it captures almost all of the benefit without ever meeting the charge.
Three details worth checking on your own mortgage offer, because they vary and the offer is the document that counts:
- What the 10% is measured against. Most lenders use the balance outstanding at the start of each anniversary year, so the cash allowance shrinks as the balance does. The warning on this calculator measures against the original loan, which is a simplification.
- When the year starts. Some lenders use the anniversary of the mortgage, some the calendar year. Overpaying in December and January can land in the same allowance year or in two different ones.
- Whether unused allowance carries over. Usually it does not.
An early repayment charge is not automatically a reason to wait. If you are remortgaging anyway, or the charge is small against the interest you would avoid, paying it can still come out ahead. It just has to be arithmetic rather than assumption.
Why the same overpayment is worth more the earlier you make it
Interest is charged on what you still owe, so a pound off the balance today stops accruing interest for every remaining month of the term. Early in a mortgage that is most of the term; late on it is almost none of it. The same £100 a month, started at different points on the same £250,000 loan:
| £100 a month started in | Interest saved | Mortgage clear in |
|---|---|---|
| Year 1 | £21,871 | 22y 2m |
| Year 6 | £13,101 | 23y 0m |
| Year 11 | £6,894 | 23y 8m |
| Year 16 | £2,867 | 24y 3m |
Waiting ten years to start costs about two thirds of the benefit. This is the strongest argument for a small overpayment you can actually afford now over a larger one you intend to start later.
Does overpaying shorten the term or reduce the payment?
A lender can do either, and the difference is substantial.
Reducing the term keeps your monthly payment where it is and brings the end date forward. All of the saving stays with you as interest you never pay. This calculator models term reduction: the required payment stays fixed, the overpayment is added on top, and the balance reaches zero sooner.
Reducing the payment keeps the end date and recalculates the monthly amount downward over the remaining term. It frees up cash each month but gives back most of the interest saving, because the balance stays higher for longer. Some lenders do this by default, and some only recalculate at the next annual review or product switch, which means a run of overpayments can sit there doing less than you assumed. Ask which your lender does, and ask in writing for overpayments to come off the term if that is what you want.
Common questions
Is a lump sum or a monthly overpayment better?
Whichever gets the money onto the balance sooner. A lump sum today beats the same total dripped in over a year, because it starts suppressing interest immediately. But a standing order you never think about usually beats a lump sum you keep meaning to arrange, and regular overpayments are easier to stop if circumstances change. Use the one-off and monthly fields together to compare both shapes on your own numbers.
Will overpaying hurt my remortgage?
The opposite, generally. A smaller balance against the same property value means a lower loan-to-value ratio, and lenders price in bands, commonly 60%, 75%, 80%, 85% and 90%. Crossing into a lower band can cut the rate on the entire remaining loan, so an overpayment that takes you just past a boundary before a product switch can be worth considerably more than its face value. Check where you sit before you remortgage rather than after.
Can I get the money back if I need it?
Only if your lender offers an overpayment reserve or a flexible facility, and many do not. Treat an overpayment as a one-way transaction unless you have confirmed otherwise, and keep a cash buffer outside the mortgage for the things that do not wait.
Does overpaying change my monthly payment straight away?
Not if the overpayment is applied to the term, which is what this calculator assumes. Your required payment stays the same and the mortgage simply ends sooner. If your lender applies overpayments by reducing the payment instead, the figures here will overstate the interest saved.
Figures on this page are illustrative, rounded, and assume the rate holds for the whole term. Compare against a standard repayment schedule with the mortgage calculator, or work out what a move would leave you with using the house sale what-if calculator. This is general information, not financial advice; check your own mortgage offer and speak to your lender or a qualified adviser before acting.