See how much interest you save — and how early you pay off — by overpaying each month
Every pound you overpay reduces your outstanding balance immediately, which reduces the interest charged in future months. Because mortgage interest is calculated on the remaining balance, even a small regular overpayment compounds into significant savings over the life of the loan.
For example, overpaying £200/month on a 25-year £250,000 mortgage at 4.5% saves over £26,000 in interest and cuts the mortgage by around 4 years.
Overpaying is usually worthwhile when your mortgage rate is higher than the return you could get on savings, because every overpayment cuts the balance interest is charged on. Even modest regular overpayments can save thousands in interest and shorten the term by years. Keep an emergency fund first and check your lender allows penalty-free overpayments.
Most fixed-rate deals allow you to overpay up to 10% of the outstanding balance each year without an early repayment charge, but limits vary by lender. Exceeding the allowance can trigger a percentage-based penalty. Always confirm your specific overpayment allowance and any charges with your lender before making large payments.
Overpaying to shorten the term keeps your monthly payment the same and clears the debt sooner, saving the most interest. Choosing to lower the monthly payment instead gives you more cash flow each month but less total interest saving. Reducing the term generally wins if your budget can absorb the payment.
No, overpaying does not harm your credit score and can help by reducing your overall debt. Your mortgage stays reported as being paid on time or ahead of schedule. It simply lowers the balance and the interest you pay over the life of the loan.
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