Mortgage overpayment calculator
Overpaying stops interest being charged on the money you pay off, so it shortens the term and cuts the total interest. See what a monthly or lump-sum overpayment does.
Why overpaying works so hard
Interest is charged on whatever you still owe. Pay an extra amount off the balance and that money never gets charged interest again, for every remaining month of the term. Because the saving compounds over years, even a modest monthly overpayment can remove a surprising amount from both the term and the total interest.
Early payments matter most. A lump sum in year one has the whole remaining term to save interest, while the same amount near the end saves very little. That is why overpaying sooner, and keeping it regular, gives the biggest result. Watch the penalty-free allowance, though: most fixed deals cap free overpayments at 10% of the balance a year, and going over during a fixed period can trigger an early repayment charge.
Worked example
On a £220,000 balance at 4.50% with 25 years left, the normal payment is £1,222.83 a month. Add £200 a month and you clear the mortgage in 19 years 4 months instead of 25 years, saving £37,238 in interest. That overpayment is well within the £22,000 a year free allowance on this balance.
Common questions
How much does overpaying save?
It depends on the amount and how early you start. On the £220,000 example at 4.50%, overpaying £200 a month saves about £37,238 in interest and clears the mortgage 5 years 8 months early. Every pound off the balance stops interest being charged on it.
Is there a limit on overpayments?
Most fixed-rate deals let you overpay up to 10% of the outstanding balance each year with no penalty. Go above that during a fixed period and an early repayment charge can apply. On a £220,000 balance that free allowance is about £22,000 a year. Always check your own deal.
Should I overpay or save the money instead?
Compare your mortgage rate against the after-tax return on savings. If your mortgage rate is higher than what you can earn on savings after tax, overpaying usually wins. Keep an emergency fund first, and clear more expensive debts, such as credit cards, before overpaying a mortgage.
Does a lump sum or monthly overpayment work better?
A lump sum paid early has the longest time to cut interest, so it is powerful. Regular monthly overpayments add up steadily and are easier to sustain. This tool lets you combine both, so you can see the effect of an upfront amount plus an ongoing top-up.
Will overpaying lower my monthly payment?
Usually it shortens the term rather than cutting the payment, so you finish sooner. Some lenders let you choose to reduce the payment instead. If you want lower payments now rather than an earlier finish, ask your lender which option they apply.