Mortgage Overpayment Calculator

Mortgage overpayments reduce your outstanding balance faster, which means you pay less interest over the life of the loan. Most UK lenders allow you to overpay up to 10% of the outstanding balance each year without triggering an early repayment charge. When you make one, the lender asks what you want it to do: shorten the term, or lower the monthly payment. That single choice is worth more than most borrowers realise.

Reducing the term keeps your monthly payments the same but clears the mortgage sooner, while reducing the payment lowers your monthly outgoing and keeps the same end date. Over the long run, cutting the term usually saves considerably more, because the principal falls faster. On a £200,000 mortgage at 5% over 25 years, £100 a month put towards the term clears the debt in 21 years 6 months and saves £24,505 in interest. The same £100 a month used instead to lower the payment, with the lender recalculating it each time and the end date kept at 25 years, saves only about £10,700. That is a gap of about £13,800 for identical money.

Timing explains most of that difference. Mortgage interest is front-loaded, so early monthly payments are largely interest rather than principal. An overpayment in year 1 reduces the balance on which every subsequent year's interest is calculated, whereas the same £100 handed over in year 24 saves only a few months of interest. That is why £100 a month from day one on a £200,000 mortgage at 5% over 25 years takes 3 years 6 months off the term.

This calculator models the shorter-term approach, with your monthly payment unchanged. Enter your current balance, interest rate, remaining term and proposed monthly overpayment, and it returns the interest saved, the new term and whether a year of overpayments stays within the usual 10% annual limit. Check that limit in your own mortgage offer, because some deals allow only 5% and a few allow 20%. Go over it and an early repayment charge applies, typically 1-5% of the overpayment, often tapering through the fixed period at 5% in year 1, 4% in year 2 and 3% in year 3. The allowance normally resets on the mortgage anniversary, and once the fix ends or you sit on the SVR, overpayments are usually unlimited.

Lump sums behave differently from monthly amounts, and the gap is wider than it looks. A £10,000 lump sum paid at year 5 of a £200,000 mortgage at 5% over 25 years saves about £15,900 in interest and shortens the term by 22 months. The same £10,000 paid from year 5 at £100 a month, which takes 8 years 4 months, saves only about £11,400 and 18 months, because each later instalment has less time left to work. Bonuses, inheritances and built-up savings are therefore the most efficient source, and most lenders now accept lump sum overpayments online at any point in the year.

Whether to overpay at all depends on the rate you are paying. Every £100 overpaid on a 4.5% mortgage earns a guaranteed 4.5%, in the sense that it is interest you never hand over, and many borrowers now pay more: Moneyfacts put the average two-year fix at 5.73%, the five-year fix at 5.78% and the standard variable rate at 7.13% on 15 September 2026. A Stocks and Shares ISA might return 7-10% over the long term, but with volatility and no guarantee attached. Below 4% the investment case usually wins on expected return. Above 5% overpaying tends to win once risk is taken into account. Plenty of people run both, overpaying enough to clear a high-rate fix and investing the rest, and higher-rate taxpayers should also weigh pension contributions, where 40% relief often beats either option.

One practical habit is worth building: keep track of how much of the annual allowance you have used, because unused capacity does not carry forward. Regular overpayments rarely come close to the ceiling, since £200 a month is £2,400 a year against a 10% allowance on a £200,000 balance. The risk runs the other way, when a bonus or a maturing savings pot tempts you into a single payment that crosses the line late in the mortgage year.