Mortgage Overpayment Calculator

Overpaying your mortgage: what the numbers actually do

An overpayment is the rare financial move whose return is exactly knowable: every pound you pay early stops accruing interest at your mortgage rate for the rest of the term. Because that pound would otherwise have been charged interest, then interest on that interest, the saving compounds — which is why modest, regular overpayments produce numbers that look implausible until you see the schedule. The calculator above simulates your mortgage month by month, twice: as it stands, and with your overpayment applied.

Worked example

A £200,000 balance at 4.5% with 25 years left costs £1,111.66 a month and £133,499 in interest over the full term. Add £200 a month — and the mortgage clears in 18 years 11 months instead of 25, saving 6 years 1 month and £36,280 of interest. You paid in an extra £45,400 of your own money and bought back £36,280 you would otherwise have handed the lender, plus six years without a mortgage payment.

Rules to check before you start

• The 10% rule — and what it is 10% of. Most fixed-rate deals allow roughly 10% a year penalty-free, but lenders measure it differently: Nationwide uses 10% of the original loan amount, HSBC 10% of the outstanding balance. Some allow 20%, and trackers or standard variable rates are often unlimited. Read your own terms — the difference can be thousands.
• Beyond the allowance, an Early Repayment Charge applies — typically 1–5% of the amount repaid. It often tapers as the fixed period runs down, but not always: flat ERCs across the whole deal exist. Under FCA rules an ERC must be a reasonable pre-estimate of the lender's costs, and the maximum must be stated in your mortgage illustration — that document, not a guide, is authoritative for your deal.
• Term or payment — check your lender's default, don't assume it. The two behaviours genuinely differ in the market: HSBC leaves the monthly payment alone (so the term shortens), while Nationwide reduces the payment automatically on overpayments of £500+ unless you set a preference. Shortening the term is what produces the saving shown above — so state your preference explicitly.
• Ask them to apply it to capital immediately, not hold it as a credit against future payments — the two are not the same, and the difference is real interest.
• Keep an emergency fund first. Money in the house is hard to get back out; a further advance or remortgage costs time, fees and an affordability check.
• Compare against your other debts and savings. This page shows what overpaying does — it does not tell you whether it beats clearing a credit card, filling an ISA or topping up a pension. Those numbers are yours to weigh.

Additional questions

Is it better to overpay or to save the money?

That depends on your rate, your tax band and your circumstances — and it is a decision only you can make. The comparison worth running: overpaying saves you interest at your mortgage rate, guaranteed and tax-free; savings earn their rate, possibly taxed (see our savings calculator). When the mortgage rate is higher than your after-tax savings rate, the arithmetic favours overpaying — but arithmetic is not the whole picture, and flexibility has value.

Does overpaying help me remortgage?

Often, yes. A lower balance improves your loan-to-value, and LTV bands (75%, 70%, 60%) are where the cheapest rates live. Crossing a band before your fix ends can cut your next rate meaningfully.

Does a one-off lump sum work as well as monthly overpayments?

Better, pound for pound, because it starts saving interest immediately — earlier money works longer. The calculator supports both, so you can compare a lump sum against the same amount spread monthly.