Mortgage overpayment calculator
What paying a bit extra each month actually buys you, in years off the term and interest never paid.
- Current monthly payment
- £0
- New monthly payment
- £0
- Interest without overpaying
- £0
- Interest with overpaying
- £0
- Paid off in
- 0
Why a small overpayment does so much
A mortgage payment is split between interest and capital, and early on it is mostly interest. An overpayment does not get split: every penny comes off the capital. That smaller balance then charges less interest next month, and every month after, for the rest of the term. The saving compounds in your favour.
On a typical £200,000 mortgage at 4.5% over 25 years, paying an extra £200 a month clears the debt roughly six years early and avoids around £36,000 of interest. The overpayments themselves total about £45,000, so each pound overpaid buys about 80p of interest you never pay. The earlier in the term you start, the better that ratio gets.
Check the annual limit first
Most fixed-rate deals let you overpay 10% of the outstanding balance each year without penalty, which on a £200,000 balance is £20,000, far more than most people put in. Go over it and an early repayment charge applies, usually 1% to 5% of the excess. Trackers and standard variable deals are often unrestricted. Two minutes checking your paperwork is worth it before setting up a standing order.
Term reduction, not payment reduction
Lenders will usually let an overpayment either shorten the term or lower the monthly payment. Shortening the term saves substantially more, because you keep paying the same amount into a balance falling faster. Ask for the term to reduce, and confirm in writing: some lenders default to the other option.
One thing worth keeping in view. An overpayment is hard to get back. Money in the house is not money in an emergency fund, and lenders are not obliged to lend it to you again. Keep three to six months of expenses somewhere you can reach before overpaying seriously.
Common questions
- Should I overpay the mortgage or put the money in savings?
- Compare the mortgage rate against the savings rate after tax. Overpaying at 4.5% is equivalent to a guaranteed, tax-free 4.5% return, which is hard to beat in an ordinary savings account. Pay off any credit card or car finance first, since those rates are far higher.
- Will my lender charge me for overpaying?
- Most fixed-rate deals allow 10% of the outstanding balance each year without penalty. Beyond that an early repayment charge applies, typically 1% to 5%. Check your annual limit before setting up a standing order.
- Should the overpayment shorten the term or cut the payment?
- Shortening the term saves far more interest, because you keep paying the same amount into a balance that is falling faster. Reducing the monthly payment feels better now and costs more overall. This calculator assumes the term shortens.
- Is a lump sum better than paying monthly?
- A lump sum paid today saves more than the same amount spread over a year, because every month of a lower balance is a month of lower interest. If you have the money now, earlier is always better.