Guide · Mortgage overpayments

Mortgage overpayments explained

How overpaying your mortgage cuts interest and years, the 10% overpayment limit, early repayment charges and a worked example. Start by most fixed deals allow 10% of the balance each year without an early repayment charge. Find the figure in your mortgage offer.

By Uthman ChoudhuryPublished 20 September 2026Updated 20 September 2026

Skip the reading: use the Mortgage Overpayment Calculator for your own numbers.

How do you decide whether to overpay your mortgage?

Check your overpayment allowance. Most fixed deals allow 10% of the balance each year without an early repayment charge. Find the figure in your mortgage offer.
Keep an emergency fund. Overpaid money is hard to get back. Hold three to six months of expenses in accessible savings first.
Compare rates. If your savings earn more after tax than the mortgage charges, saving beats overpaying.
Choose term reduction. Ask the lender to keep your payment the same and shorten the term. That saves far more interest than reducing the monthly payment.
Overpay regularly. A standing order for the extra amount each month is the easiest way to keep it going.

How does a mortgage overpayment work?

A repayment mortgage charges interest on the outstanding balance and your monthly payment is set so the balance reaches zero at the end of the term. Any money paid above that amount reduces the balance directly, so every future month’s interest is calculated on a smaller sum. Because the saving repeats for every remaining month, the same overpayment made early in the term saves far more than one made near the end.

Worked example: £150 a month on £250,000 over 30 years

At 4.5% the standard payment is £1,266.71 and total interest over 30 years is £206,017. Paying £1,416.71 instead clears the mortgage in 24 years 2 months, saving £45,743 in interest and 5 years 10 months of payments. The overpayments total £43,500, so each pound overpaid saves about 1.05 pounds of interest.

Monthly overpayment	Interest saved	Term cut
£50	£18,120	2 years 3 months
£150	£45,743	5 years 10 months
£300	£74,167	9 years 8 months
£500	£98,991	13 years 1 months

What do people get wrong about overpaying?

Breaching the 10% limit. Early repayment charges of 1% to 5% of the overpaid amount can cost more than a year of interest savings.
Letting the lender reduce the payment. The default on some lenders is to lower your monthly payment, which keeps the term the same and saves little.
Overpaying with money that costs more elsewhere. Credit cards and personal loans usually charge more than a mortgage; clear them first.

Test your own numbers in the mortgage overpayment calculator.

Frequently asked questions

Is it worth overpaying a small amount?

Yes. Even £50 a month on a £200,000 mortgage at 4.5% over 25 years saves around £14,000 in interest and cuts about two years off the term, because the saving compounds over the remaining years.

Should I overpay or reduce the term when I remortgage?

They achieve the same thing, but overpaying is more flexible. A shorter term commits you to a higher payment every month; overpaying lets you stop if your circumstances change.

Do overpayments reduce interest immediately?

On most modern mortgages interest is calculated daily, so an overpayment reduces the interest charged from the next day. Some older mortgages calculate annually, in which case overpaying early in the year gives the best result.