Mortgage Overpayments Explained

Why overpayments are so powerful

Every extra pound you pay goes straight to reducing the principal. That principal then stops earning interest for the rest of the term — so a single overpayment today saves you interest every month for years to come.

An extra £100 a month on a typical 25-year mortgage can shave several years off the term and save tens of thousands in interest. Try it for yourself with our mortgage overpayment calculator.

The 10% rule

Most UK lenders let you overpay up to 10% of the outstanding balance per year during a fixed-rate deal without triggering an early repayment charge (ERC). Outside the fixed period you can usually overpay as much as you like.

Check your specific mortgage terms before making a large lump sum — ERCs can be steep.

Reduce term vs reduce payment

When you overpay, your lender will usually default to keeping the term the same and lowering your future monthly payments. Most savers benefit more by asking the lender to keep the payment the same and shorten the term instead.

When not to overpay

If you have higher-interest debt (credit cards, personal loans), clear that first. Make sure you also have a healthy emergency fund — money paid into your mortgage is much harder to get back than money in a savings account.