Mortgage Overpayment Calculator

How the mortgage overpayment calculator works

When you make a monthly overpayment on your mortgage, the extra amount reduces your outstanding balance directly. Because interest is charged on the remaining balance each month, a lower balance means less interest accrues and more of every subsequent payment goes towards capital. This compounding effect means that even modest regular overpayments can significantly shorten the term and reduce the total interest paid.

How overpayments reduce your balance

The calculator runs two simulations side by side. The first models the mortgage as normal, applying just your required monthly payment. The second adds your overpayment to each month's payment and reduces the balance accordingly. Both simulations run month by month until the balance reaches zero. The difference in the number of months is the term saved; the difference in total interest paid is the interest saved.

Term reduction versus payment reduction

When you overpay, your lender has two ways to apply the benefit. They can reduce your monthly payment, keeping the term the same; or they can keep your monthly payment the same and shorten the term. Shortening the term saves more interest overall, because the capital is repaid sooner and interest stops accruing earlier. Most lenders allow you to choose, and some default to reducing the payment. Check with your lender which approach applies to your mortgage.

When overpaying makes financial sense

Whether overpaying is the right choice depends on your mortgage interest rate compared to returns available elsewhere. If your mortgage rate is 4.5%, paying down the balance saves interest at 4.5% guaranteed. A savings account offering less than 4.5% after tax makes overpaying the more efficient use of spare cash. Also check your mortgage terms before making overpayments. Most fixed-rate deals allow overpayments of up to 10% of the outstanding balance per year without an early repayment charge (ERC). Exceeding that threshold may trigger a penalty. Tracker and variable-rate mortgages often have no overpayment limit.

Worked example

You have £200,000 outstanding on your mortgage at 4.5%, with 20 years (240 months) remaining.

Without overpayment: using the amortisation formula, the required monthly payment is approximately £1,265. Total interest over the remaining term: £103,600.

With an overpayment of £200 per month (total monthly payment £1,465): solving for the new term, the mortgage is repaid in approximately 192 months (16 years). Interest paid: approximately £81,280.

Overpaying £200 per month saves 48 months (4 years) off the mortgage term and reduces total interest by around £22,320. The earlier in the mortgage term you start overpaying, the greater the savings, because interest compounds on the balance over a longer period.

Frequently asked questions

Is there a limit on how much I can overpay?

Most fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without an early repayment charge. Tracker and variable-rate mortgages often have no limit. Check your mortgage offer document or contact your lender to confirm the rules for your specific product before making large overpayments.

Will overpaying reduce my monthly payment or shorten my term?

It depends on how your lender applies overpayments. Some lenders automatically reduce your required monthly payment; others keep the payment the same and shorten the term. Keeping the payment the same and shortening the term saves more interest. Most lenders allow you to specify which outcome you prefer. Contact your lender to confirm the default and how to change it if needed.

Can I get my overpayments back if I need the money?

Generally no. Once paid, overpayments reduce your balance and cannot be withdrawn unless your mortgage has a flexible or offset feature. If you think you might need access to the funds, keeping money in an easy-access savings account alongside your mortgage gives you more flexibility, even if the interest saving is slightly lower.

How accurate is this calculator?

The calculator assumes a constant interest rate for the full remaining term and uses standard mortgage amortisation mathematics. It is accurate for fixed-rate mortgages during the fixed period. Actual savings will differ if your rate changes when you remortgage, if your lender applies overpayments in a way that differs from the simulation, or if you make irregular rather than monthly overpayments.

Is it better to overpay or save?

This depends on the rates involved. If your mortgage rate exceeds the after-tax return on your savings, overpaying is mathematically better. If savings rates are higher, saving may give a better return. The mortgage rate saving is guaranteed; savings rates can change. Some people prefer the certainty of reducing mortgage debt even when savings rates are competitive, particularly if they are approaching the mortgage-free milestone.

Can I make a lump-sum overpayment instead of monthly overpayments?

Yes. Most lenders accept both regular monthly overpayments and ad hoc lump-sum payments. A single large overpayment reduces the balance immediately, so all subsequent interest is calculated on a lower figure. The interest saving is smaller than the equivalent amount paid monthly from the start of the mortgage, but it is still worthwhile. Use the calculator to model a lump sum by entering the full overpayment amount spread across the months you have remaining.

What is an offset mortgage?

An offset mortgage links a savings account to your mortgage. The savings balance is deducted from the mortgage balance for interest calculation purposes. If you have £200,000 outstanding and £30,000 in the linked savings account, you pay interest on £170,000. You retain access to your savings, unlike with overpayments. Offset mortgages typically carry a slightly higher rate than standard deals, so the benefit is most significant for higher-rate taxpayers with substantial savings.

Will my mortgage rate change when I remortgage?

Almost certainly. Most UK mortgage deals last two or five years, after which you move to the lender's standard variable rate unless you remortgage. The new rate may be higher or lower than your current one, depending on market conditions at the time. Overpayment savings calculated at today's rate will differ in practice if your rate changes. The term saved, however, is broadly accurate regardless of rate changes, because a lower balance at remortgage means a shorter remaining term either way.

Does overpaying affect my credit score?

Overpaying does not directly affect your credit score. Paying on time or ahead of schedule is positive for your credit history. The balance reduction may improve your LTV ratio over time, which can help you access lower rates when you remortgage.

How do I make a mortgage overpayment?

Contact your lender directly. Most lenders accept overpayments via online banking, telephone, or by setting up an additional standing order. Some lenders have a dedicated overpayment facility in their online account. Always confirm with your lender how the overpayment will be applied (to term or to payment) and whether it counts towards your annual 10% limit.

Source: FCA Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB); Bank of England base rate data.

Understanding the 10% annual overpayment limit matters most when choosing between a 2-year and 5-year fix. See our guide Fix for 2 Years or 5 Years in 2026: How to Decide.

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