Mortgage overpayment calculator
See exactly how much interest you save and how many years you knock off your mortgage by overpaying each month. The results are often surprising.
The reason overpaying works so well is compound interest in reverse. Every pound you overpay reduces your balance, which means the interest charged next month is calculated on a smaller number. That saving compounds month after month for the rest of the mortgage term. Small amounts early on have a disproportionately large effect.
Check your limit first
Most fixed rate mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Check your mortgage terms before overpaying more than this.
Earlier is better
Overpaying in the first few years of a mortgage saves significantly more than the same amount overpaid later, because interest is charged on a larger balance early on.
Reduce term or payment?
When you overpay, you can usually choose to reduce your mortgage term or keep the term the same and reduce your monthly payment. Reducing the term saves more interest overall.
Overpaying vs saving
If your mortgage rate is higher than your savings rate, overpaying your mortgage will usually give you a better return than putting the same money in a savings account.
Please note: This calculator assumes a constant interest rate throughout the mortgage term and that overpayments are applied immediately to reduce the outstanding balance. Results are for guidance only. Always check your lender terms regarding overpayment limits before making additional payments. This is not financial advice.
Calculator results are estimates based on the information you enter and the assumptions built into the tool. They are illustrative only and should not be relied upon as accurate projections. Rates, thresholds and rules change regularly; always verify figures with an appropriate professional or official source before acting on them.
What is mortgage overpayment?
Mortgage overpayment means paying more than your required monthly payment, either as a regular additional amount each month or as occasional lump sums. Any overpayment goes directly to reducing the outstanding balance, thereby reducing the interest charged in subsequent months, so more of each subsequent standard payment goes to capital. This creates a compounding effect – the overpayment saves more than its face value in interest over the remaining term.
Most lenders allow overpayments of up to 10% of the outstanding balance per year without any early repayment charge. Check your mortgage terms before overpaying – if you are in a fixed-rate deal, exceeding the 10% threshold typically triggers an ERC on the excess amount.
How to use this calculator
Current balance: Enter your current outstanding mortgage balance.
Interest rate: Enter your current interest rate.
Remaining term: Enter the number of years remaining on your mortgage.
Monthly overpayment: Enter the additional amount you plan to pay each month above your standard payment.
Lump sum: If you are considering a one-off overpayment rather than a monthly amount, enter it here.
Reading the result: The calculator shows how many years and months are removed from your term, and the total interest saved compared to making no overpayments. Both figures can be substantial – on a £200,000 mortgage at 5% with 20 years remaining, overpaying by £200 per month saves approximately £26,000 in interest and cuts four years from the term.
Is overpaying always the right choice?
Overpaying saves a guaranteed amount equal to your mortgage interest rate. If your savings or investments consistently earn more than your mortgage rate, investing the money may produce a better financial outcome than overpaying. If your savings rate is lower than your mortgage rate, overpaying yields a higher return.
The comparison is not purely financial — overpaying provides security and reduces financial commitment; investing carries market risk. Many people do both: overpay to a comfortable level and invest the rest.
Tax wrappers also affect the comparison. Returns inside a stocks and shares ISA are tax-free; mortgage interest savings are also tax-free. The post-tax comparison should use ISA returns, not taxable returns.
Frequently asked questions
Can I overpay on any mortgage? Most mortgages allow overpayments up to 10% of the outstanding balance per year without penalty. Some tracker mortgages allow unlimited overpayments. Check your mortgage offer document for the specific terms – the overpayment allowance and any ERC details will be clearly stated.
What happens if I overpay more than 10%? If you exceed the annual overpayment allowance during a fixed rate deal, the excess typically triggers an early repayment charge – usually 1 to 5% of the amount overpaid above the threshold. Calculate the ERC before making a large lump sum overpayment.
Does overpaying reduce my monthly payment or shorten the term? Most lenders apply overpayments to reduce the term while keeping the monthly payment the same. Some allow you to choose either a shorter term at the same payment, or a lower payment over the same term. A shorter term at the same payment maximises the interest savings.
Can I use overpayments to reach a better LTV band? Yes – and this can be a highly effective use of overpayments. If you are just above an LTV threshold (say 76%), an overpayment to bring the balance below 75% may reduce your next remortgage rate by a meaningful margin. Use the LTV calculator alongside this one to check your current position.
What is a mortgage payment holiday, and does it affect overpayments? Some lenders allow payment holidays – periods where you make no payment. Any overpayments you have built up can sometimes be used to fund these, depending on your lender’s terms. Check with your lender before assuming that payment holidays are available or that they are funded by overpayments.
The information on this site is for educational and informational purposes only. Nothing on Be More Peter constitutes financial advice, and nothing should be treated as such. The calculators, articles and tools on this site are designed to help you understand financial concepts and run indicative numbers - they are not a substitute for professional advice tailored to your specific circumstances. Before making any financial decision - including decisions about mortgages, pensions, investments, savings or insurance — you should seek independent financial advice from a qualified adviser who is authorised and regulated by the Financial Conduct Authority (FCA). Calculator results are estimates based on the information you enter and the assumptions built into the tool. They are illustrative only and should not be relied upon as accurate projections. Rates, thresholds and rules change regularly - always verify figures with an appropriate professional or official source before acting on them. Be More Peter is not authorised or regulated by the FCA. The content on this site does not constitute a financial promotion.
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- Mortgage repayment calculator — your standard monthly payment
- LTV calculator — your equity position after overpayments
- Remortgage calculator — what you could save by switching
- Should I overpay my mortgage?
- How overpaying by £200 a month changes your mortgage
- ISA calculator — compare the alternative of investing instead