Mortgage Overpayment Calculator 2026

How mortgage overpayment works

When you make an overpayment, the extra money reduces your outstanding mortgage balance immediately. Because interest is calculated on the remaining balance, a lower balance means less interest charged every month going forward. This compounds over time: even a modest £100 per month overpayment on a £200,000 mortgage at 4.5% saves thousands of pounds in interest and can cut several years from the term.

A lump sum overpayment works the same way but delivers the interest saving all at once from the point it is applied. The most impactful time to make a lump sum overpayment is early in the mortgage term, when the balance is highest and the most interest is still to be charged.

The 10% overpayment rule explained

Most fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. On a £200,000 mortgage, that is £20,000 per year — or approximately £1,667 per month — before any Early Repayment Charge applies. Check your mortgage offer or call your lender to confirm your specific allowance. Tracker and variable rate mortgages often have no overpayment limit at all.

Frequently asked questions

Should I overpay my mortgage?

Overpaying your mortgage is usually a good idea if you have no higher-interest debt (such as credit cards or personal loans) and you have an adequate emergency fund. Every pound of mortgage overpayment saves you the mortgage interest rate in guaranteed return — if your rate is 4.5%, overpaying is equivalent to earning 4.5% tax-free. Compare this to what your savings account is paying and the decision becomes clear. However, if you have a fixed-rate deal with an early repayment charge, check your allowance before overpaying.

How much can I overpay without penalty?

Most lenders allow overpayments of up to 10% of the outstanding mortgage balance per year without triggering an Early Repayment Charge (ERC). Some tracker and variable rate mortgages have no ERC at all. The 10% allowance typically resets each year on the anniversary of your mortgage start date. Always check your mortgage offer document or call your lender before making a large overpayment.

Does overpaying a mortgage reduce my monthly payments or the term?

Most lenders apply overpayments to reduce the term by default, keeping your monthly payment the same but paying the mortgage off sooner and saving the most interest. Some lenders will reduce your monthly payment instead if you ask — this lowers your outgoings but saves less interest overall. Ask your lender which approach they use and request a switch if needed.

Is it better to overpay my mortgage or save?

The answer depends on the rates. If your mortgage interest rate is higher than the after-tax return on your savings, overpaying wins. If your savings rate exceeds your mortgage rate (which happens less often), saving may be better. For example, at a 4.5% mortgage rate versus a 3% savings rate, overpaying beats saving. Also consider that mortgage interest is effectively a guaranteed, risk-free return, whereas investments carry risk.

What is an Early Repayment Charge?

An Early Repayment Charge (ERC) is a fee your lender charges if you repay more than the permitted allowance (typically 10% per year) during a fixed or discounted rate period. ERCs are usually expressed as a percentage of the amount overpaid or the outstanding balance — commonly 1%–5%. They exist to compensate the lender for the interest they lose. ERCs generally disappear when you move to a standard variable rate or the fixed period ends.

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