Mortgage Overpayment Calculator
Making small extra payments on your mortgage each month can cut years off your term and save tens of thousands in interest. This calculator shows you the exact numbers: enter your mortgage details, move the overpayment slider, and see the interest saved, the new payoff date, and a side-by-side balance chart.
How to Use This Calculator
- Loan amount: the outstanding balance or original loan amount.
- Annual interest rate: your current mortgage rate (e.g. 4.6%).
- Term: the original or remaining term in years.
- Overpayment: drag the slider or type a custom amount. This is the extra you pay on top of your regular monthly payment.
The Results tab shows a comparison table and the Chart tab plots the balance curves side by side: dashed = no overpayment, solid = with overpayment.
Why Mortgage Interest Is Front-Loaded
A standard repayment mortgage follows amortization: each payment covers the interest accrued that month plus a slice of principal. In the early years, the balance is at its highest, so more of each payment goes to interest and very little reduces the debt. This is why the balance barely falls on the chart for the first few years.
Worked example, £297,500 @ 4.6% over 25 years:
| No overpayment | +£100/mo | |
|---|---|---|
| Monthly payment | £1,640 | £1,740 |
| Total interest | ~£194,600 | ~£172,400 |
| Mortgage term | 25 years | ~22 yrs 8 mos |
| Interest saved | n/a | ~£22,200 |
| Finishes early | n/a | ~2 yrs 4 mos |
Even £100 extra per month (less than a typical restaurant meal for two) clears the mortgage roughly 28 months earlier and saves over £22,000, because the overpayment attacks the principal directly and reduces every future month's interest charge.
Formula & How It's Calculated
Monthly payment uses the standard annuity formula:
where:
- P = principal (loan amount)
- i = monthly interest rate = annual rate ÷ 1200
- n = total months = years × 12
With an overpayment, each month the regular payment plus the extra amount is applied to the balance. This shortens the time to zero balance and reduces total interest, since every extra pound reduces the principal on which next month's interest is charged.
Interest saved = total interest (no overpayment) − total interest (with overpayment)
Overpay vs Save / Invest: the Tradeoff
Overpaying is mathematically equivalent to earning a guaranteed, risk-free return equal to your mortgage rate. In 2024–25, a 4.6% rate beats most cash-savings rates after tax and beats any guaranteed investment.
However, overpaying has opportunity costs:
- Emergency fund first. Keep 3–6 months' expenses in accessible savings before overpaying.
- Higher-rate debt first. Credit cards and personal loans at 10–20%+ should be cleared before the mortgage.
- Pension contributions. Employer-matched pension contributions typically beat mortgage overpayment on a net-return basis. Maximise those first.
- ISA vs overpayment. If you are a higher-rate taxpayer and your mortgage rate is 4–5%, a Stocks and Shares ISA with a long investment horizon may outperform overpayment, but with more risk.
MoneyHelper has a clear guide on this decision. MoneyHelper is the UK government's free, impartial money guidance service.
Early-Repayment Charges (ERCs): Read This First
Most fixed-rate and tracker mortgages in the UK allow annual overpayments of up to 10% of the outstanding balance without penalty. Above that threshold, your lender may charge an early-repayment charge (ERC), typically 1–5% of the overpaid amount.
Before overpaying:
- Check your mortgage offer document or call your lender.
- Confirm the annual overpayment allowance (usually resets each year on your mortgage anniversary).
- If you want to overpay more than 10%, ask whether the ERC would eat into your interest savings.
ERCs typically apply only during the initial fixed/tracker period (e.g. 2, 5 or 10 years). After that you move to the Standard Variable Rate (SVR) and can usually overpay freely, though it is also a good time to remortgage.
Frequently Asked Questions
Does it matter when I start overpaying?
Yes. The earlier in the mortgage term you overpay, the more you save. Because interest is calculated on the current balance, reducing the balance early has a compounding effect on future interest. An overpayment in year 2 saves more than the same overpayment in year 20.
What happens to my payment after I overpay?
Most lenders keep your monthly payment the same and shorten the remaining term. A few will recalculate a lower monthly payment instead. This calculator assumes the standard approach (term shortens). Check with your lender which method they use.
Can I make a one-off lump-sum overpayment?
Yes. This calculator models regular monthly overpayments, but a lump-sum works the same way: you can think of it as equivalent to the monthly amount multiplied by 12 (e.g. £100/mo ≈ £1,200 lump sum per year). For a one-off payment, check our Mortgage Calculator and model it by reducing the starting balance.
Should I use savings to overpay?
Not necessarily. If your savings rate after tax exceeds your mortgage rate, keep the savings. If it is lower, overpaying is mathematically better, and it is guaranteed, unlike investment returns.
What if I'm on an interest-only mortgage?
Interest-only mortgages work differently: your regular payment covers only the interest, and no principal is repaid unless you overpay. This calculator models repayment mortgages. For interest-only, every pound of overpayment is pure principal reduction.
Disclaimer
This calculator is for illustration only and does not constitute financial or mortgage advice. Results assume a fixed interest rate throughout the term and do not account for early-repayment charges, lender overpayment caps, changes in rate, or tax treatment. Always check your mortgage terms and speak to a qualified mortgage adviser before making financial decisions.