Mortgage Overpayment Calculator

Why Overpaying Is the Best Investment You Can Make

Overpaying your mortgage is one of the highest-return, lowest-risk financial moves available to UK homeowners. Every pound you overpay goes straight to reducing your capital, saving you interest at your mortgage rate for the entire remaining term. On a £200,000 mortgage at 5.09% over 25 years, overpaying £200/month saves about £28,000 in interest and cuts about 5 years off the term. That's a guaranteed, tax-free return that no Cash ISA or savings account can match.

The math is compound interest in reverse. Your normal payment is calculated so that, over the full term, you pay off exactly the principal plus all the interest. When you overpay, the extra goes straight to principal — which means next month's interest is calculated on a smaller balance, so more of your normal payment goes to principal, which reduces the next month's interest, and so on. The effect snowballs: the earlier you start overpaying, the bigger the snowball.

The 10% Rule

Most UK lenders allow overpayments of up to 10% of the outstanding balance per year during the fixed-rate period without penalty. On a £200,000 mortgage, that's £20,000 per year — far more than most people can afford to overpay. If you exceed the 10% limit, you'll trigger an Early Repayment Charge (ERC), typically 1-5% of the overpayment amount.

Lump Sum vs Monthly

A lump sum paid early in the mortgage has a much bigger impact than the same amount paid later, because it has more time to compound. A £10,000 lump sum in year 1 of a 25-year mortgage at 5.09% saves about £20,000 in interest; the same £10,000 in year 20 saves about £3,000. If you come into money, pay it into the mortgage immediately.

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