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Calculations assume a fixed interest rate throughout. Many UK lenders cap overpayments at 10% of the outstanding balance per year — check your mortgage terms before overpaying. This calculator is for illustrative purposes only and does not constitute financial advice.
How does a mortgage overpayment work?
When you take out a repayment mortgage, each monthly payment you make covers two things: the interest your lender charges for that month, and a portion of the original loan itself.
In the early years of a mortgage, the majority of your payment goes towards interest, with only a small amount reducing the actual debt.
This is why overpaying, even modestly, can have such a dramatic effect.
When you make an overpayment, the extra money goes directly towards reducing your outstanding balance.
A lower balance means less interest is charged the following month, which in turn means more of your regular payment goes towards the debt rather than interest.
This compounding effect is what makes overpaying so powerful, and why starting early in your mortgage term gives the greatest benefit.
What counts as an overpayment?
An overpayment is any amount you pay above your contracted monthly payment.
This can be a regular monthly top-up, say an extra £100 or £200 each month, or an occasional lump sum, for example using a work bonus or inheritance.
Both approaches reduce your balance and save you interest, though lump sums have a bigger immediate impact.
Are there any limits?
Most UK lenders allow you to overpay up to 10% of your outstanding mortgage balance each year without any penalty.
If you exceed this limit during a fixed-rate deal, you may be charged an early repayment charge (ERC).
It is always worth checking your mortgage terms or calling your lender before you start overpaying, particularly if you are in a fixed-rate period.
Should I overpay or save?
This depends on your circumstances.
As a general rule, if your mortgage interest rate is higher than the interest rate you could earn on savings, overpaying your mortgage will give you a better financial return.
However, it is also worth ensuring you have an emergency fund in place before committing to regular overpayments, as money paid into your mortgage is not as easily accessible as cash in a savings account.
A financial adviser can help you decide what is right for your situation.
Important: This calculator is intended as a guide only and assumes your interest rate remains fixed for the full term. Your actual savings may differ. This does not constitute financial advice.