Should you overpay your mortgage?
On a repayment mortgage, interest is charged on your outstanding balance. Every pound you overpay reduces that balance immediately, so you are charged less interest in every later month — and because the effect compounds over years, small overpayments early in the term can save a surprising amount. Most lenders let you either shorten the term (keeping the payment the same) or reduce the monthly payment; this calculator shows the shorter-term route.
Worked example: £200,000 at 5% over 25 years
- Standard payment: £1,169 a month, with about £150,750 of interest over the full 25 years.
- Overpay £200 a month: the mortgage is cleared in about 18 years 10 months — roughly 6 years 2 months sooner — and you save about £41,800 of interest.
- Overpay a one-off £10,000 lump sum today: the mortgage ends about 2 years 4 months sooner and saves about £22,900 of interest.
Check your early repayment charge (ERC) allowance first
Many fixed-rate and discounted deals let you overpay up to a set limit each year — commonly 10% of the balance — without a penalty. Go over that limit during the deal period and you can be charged an early repayment charge, often a percentage of the amount overpaid above the allowance. Tracker and standard variable rate deals often have no such charge. The calculator shows what share of your balance you would overpay in the first year so you can compare it against your lender's allowance.
When overpaying may not be the best use of cash
- You do not yet have an emergency fund — money paid into a mortgage is hard to get back out.
- You have more expensive debt, such as credit cards or personal loans, which is usually better to clear first.
- Your mortgage rate is low and you could earn more in a savings account or pension (after tax and risk).
- Your lender would charge an ERC on the amount you plan to overpay.
How this calculator works
It works out the standard repayment for your balance, rate and remaining term, then simulates each month with your overpayment and any lump sum applied. It assumes the interest rate stays the same for the whole remaining term, so real results will differ if your rate changes — for example when a fixed deal ends. To see how a rate change would affect your payment, use the mortgage repayment calculator. If you are thinking about releasing equity instead, try the LTV calculator.