What is the Mortgage Overpayment?
A mortgage overpayment goes entirely against the capital, so it removes every future interest payment that capital would have generated. The saving is far larger than the overpayment itself.
Most UK lenders allow overpayments of 10% of the balance per year without penalty while on a fixed rate, and unlimited overpayments once on the standard variable rate.
Formula & worked example
Interest saved = Original total interest − new total interest
Worked example: a £220,000 balance at 4.75% over 24 years has a payment of about £1,282 and total interest near £149,100. Overpaying £250 a month clears the mortgage 6.3 years early — in 17.8 years instead of 24 — and saves close to £43,200 in interest — a return no savings account can match.
How to use this mortgage overpayment calculator
- Enter your current balance, rate and years remaining.
- Add the monthly overpayment you can afford.
- Include any lump sum you plan to pay in.
- Check your lender's annual overpayment limit before committing.
Smart tips
- Overpaying is a guaranteed, tax-free return equal to your mortgage rate — compare it against savings rates after tax.
- Check early repayment charges. Most fixes allow 10% a year penalty-free; above that costs 1–5%.
- Ask the lender to reduce the term rather than the payment, or overpayments may just lower future payments.
- Build an emergency fund first. Money in the mortgage is hard to get back out.
- If your mortgage rate is below what savings pay after tax, saving may beat overpaying — but the gap is rarely large.
Frequently asked questions
How much can I overpay my mortgage?
Most UK fixed-rate deals allow 10% of the outstanding balance each year without penalty. Check your specific terms.
Should I reduce the term or the payment?
Reducing the term saves far more interest. Reducing the payment gives flexibility but keeps you in debt longer.
Is overpaying better than saving?
Overpaying gives a guaranteed tax-free return equal to your mortgage rate. It usually wins unless savings rates after tax are higher.
Do overpayments reduce my monthly payment?
Only if you ask. By default many lenders keep the payment and shorten the term, which saves more interest.
Want the theory behind the numbers? Read our UK mortgage guides on the Money Blog.