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Mortgage overpayments: should you overpay, and how much could you save?
A mortgage overpayment is any money you pay on top of your normal monthly payment. It goes straight off the amount you owe, so you pay less interest and can be mortgage-free sooner. On a £200,000 mortgage at an illustrative 5%, an extra £100 a month could save around £24,500 in interest and clear the loan three and a half years early. Here's how it works, how much you could save and when saving or investing might make more sense.
Updated on 17 September 2026 with new worked examples and the latest savings tax rules.
Interest saved
£24,505
By overpaying £100 a month on £200,000 over 25 years at 5%
Time saved
3½ years
The mortgage is paid off in 21 years 6 months instead of 25 years
Illustration only. Assumes a repayment mortgage, a constant 5% rate for the whole term, interest calculated monthly and overpayments used to shorten the term. Real rates change, and your lender's calculation may differ slightly.
What is a mortgage overpayment?
Your normal monthly payment covers the interest for that month plus a slice of the loan. An overpayment is anything extra. Because it all comes off the balance, next month's interest is worked out on a smaller figure, and the saving compounds for the rest of the term.
There are two ways to overpay:
- Regular overpayments, such as an extra £100 a month by standing order or a higher direct debit.
- Lump sum overpayments, such as a bonus, inheritance or savings you don't need.
Most lenders let you do both, online or by phone, but check how your lender wants overpayments made so they're applied to the balance correctly.
How much could you save by overpaying? Worked examples
We can't put a mortgage overpayment calculator on this page, so here are the numbers worked out for a typical loan. All examples use a £200,000 repayment mortgage over 25 years at 5%, with a standard monthly payment of £1,169.18 and total interest of £150,754 if you never overpay.
| Regular overpayment | Mortgage paid off in | Time saved | Interest saved |
|---|---|---|---|
| None | 25 years | – | – |
| £50 a month | 23 years 1 month | 1 year 11 months | £13,415 |
| £100 a month | 21 years 6 months | 3 years 6 months | £24,505 |
| £200 a month | 18 years 10 months | 6 years 2 months | £41,843 |
| £300 a month | 16 years 10 months | 8 years 2 months | £54,833 |
Even £300 a month is £3,600 a year, well inside a typical 10% allowance on a £200,000 loan.
Mortgage balance with and without overpayments
£200,000 repayment mortgage over 25 years at 5%, illustration only
A £10,000 lump sum: reduce the term or reduce the payment?
Say you pay £10,000 off at the end of year one, when the balance is £195,876. What happens next depends on what you ask your lender to do with it.
| £10,000 overpaid after year 1 | Reduce the term | Reduce the payment |
|---|---|---|
| Monthly payment afterwards | £1,169.18 (unchanged) | £1,109.49 (£59.69 less) |
| Mortgage paid off in | 22 years 10 months | 25 years |
| Interest saved | £21,370 | £7,191 |
Reducing the term saves about three times as much interest. Reducing the payment gives you breathing room in your monthly budget instead. If you choose lower payments but carry on paying the old amount, you get close to the reduce-term result while keeping the option to drop back.
Reduce term or reduce payments: which should you choose?
Reduce the term
Best for saving the most interest
Your payment stays the same and you finish sooner. It suits you if your budget is comfortable and your main goal is to be mortgage-free earlier, for example before retirement.
Reduce the monthly payment
Best for cash flow and flexibility
Your term stays the same but each payment falls. It can help if money is tight, a payment rise is coming, or you want a lower commitment you can top up voluntarily.
Lenders handle this differently. Some reduce your monthly payment automatically after a lump sum, others shorten the term, and some let you choose each time. Tell your lender what you want when you pay, and check your next statement.
The 10% overpayment allowance and early repayment charges
Many fixed and discounted rate deals let you overpay up to 10% a year without penalty. Pay more than that during the deal period and you'll usually pay an early repayment charge (ERC) on the extra, often a few per cent of the amount above the allowance.
Check these in your mortgage offer
- How much
- Often 10% a year, but some deals allow less or more. Some lenders base it on the balance at the start of the year, others on the original loan.
- Which year
- Some allowances run by calendar year (January to December), others from the anniversary of your deal or account. Unused allowance usually can't be carried forward.
- What counts
- Regular and lump sum overpayments usually count towards the same allowance.
- Variable rates
- Standard variable rate (SVR) and many tracker mortgages usually have no ERCs, so you can typically overpay as much as you like. Check first, as some trackers do.
- Minimums
- Some lenders set a minimum lump sum or limit how often you can make one.
If you want to pay off a large sum, timing matters. Waiting until your fixed rate ends means no ERC, and it's a natural point to reduce the loan before a remortgage or rate switch. Our guide on how long to fix for covers flexibility when choosing your next deal.
Should I overpay my mortgage or save?
It depends on what your money could earn elsewhere, and whether you might need it. Money paid into your mortgage is usually hard to get back without borrowing again. Work through these in order.
1. Emergency fund first
Keep easy-access cash before overpaying
A common guide is three to six months of essential spending. If you lose income, a lender won't hand back overpayments, although a few flexible mortgages let you borrow them back.
2. Clear expensive debts
Credit cards, overdrafts and personal loans
These usually cost far more than a mortgage. Paying them off first normally saves more. Speak to us before rolling debts into your mortgage, as our guide to debt consolidation explains.
3. Don't miss an employer pension match
Free money you can't get back later
If your employer matches extra contributions, paying more into your pension can beat overpaying, especially with tax relief. Pension money is locked away until at least your mid to late 50s, though.
4. Compare rates after tax
Your mortgage rate vs your savings rate
Overpaying "earns" your mortgage rate, guaranteed and tax-free. Savings only win if the rate after tax is higher.
| Where £1 goes (mortgage at 5%) | Effective return a year |
|---|---|
| Overpaying the mortgage | 5% saved in interest |
| Cash ISA or savings within your allowance at 4% | 4% |
| Savings at 4%, basic-rate taxpayer over the allowance | 3.2% |
| Savings at 4%, higher-rate taxpayer over the allowance | 2.4% |
Rates are illustrative. In the 2026/27 tax year the Personal Savings Allowance is £1,000 of interest for basic-rate taxpayers, £500 for higher-rate and nothing for additional-rate taxpayers. From April 2027, tax on savings interest is due to rise by 2 percentage points, and the cash ISA limit is due to fall to £12,000 for under-65s. Both changes tilt the sums slightly further towards overpaying.
We are not tax advisers and this is not tax advice. The information on savings tax, ISAs and pension tax relief is a general summary based on the rules published at the time of writing, and we make no warranty about the tax you will pay. Speak to a qualified tax adviser or accountant about your own circumstances.
If you want the interest saving but also want access to your cash, an offset mortgage links your savings to the loan. They're less common than they used to be, as our article on why offset mortgages are dying out explains. Our current mortgage rates update shows where rates stand.
How overpaying can get you a better rate at remortgage
Lenders price deals in loan-to-value (LTV) bands, often in steps of 5% such as 60%, 75%, 85% and 90%. Overpaying can push you into a lower band, where rates are often cheaper.
- No overpaymentsOn a home worth £290,000, our example balance after five years is about £177,160, an LTV of 61.1%.
- £100 a month extraThe balance is about £170,360, an LTV of 58.7%, now under 60%.
- £10,000 lump sum after year 1The balance is about £164,950, an LTV of 56.9%.
Illustration only. Assumes the property value stays the same and the rate is 5% throughout. Lenders use their own valuation at remortgage.
If you're close to a band, it can be worth using this year's allowance before your deal ends. We can check where you'd land when you remortgage.
Overpaying an interest-only mortgage
On an interest-only mortgage, your payment doesn't reduce the loan at all. Overpayments are the only way to bring the balance down, and each one also lowers the interest you pay afterwards. Regular overpayments can even form part of your repayment plan. Our guide to interest-only mortgages explains what lenders accept.
Mortgage overpayment FAQs
Is it worth overpaying my mortgage?
Often, if you have an emergency fund, no expensive debts and your mortgage rate is higher than you'd earn on savings after tax. It's less clear-cut if you're on a low fixed rate or might need the money soon.
Will I be charged for overpaying my mortgage?
Not within your allowance. On many fixed and discounted deals that's 10% a year. Above it, an early repayment charge usually applies to the extra until the deal ends.
Is it better to overpay monthly or in a lump sum?
The sooner money comes off the balance, the more interest it saves. A lump sum now saves more than the same amount spread over a year, but regular overpayments are easier to budget for and to stop.
Does overpaying reduce my monthly payment?
Only if you ask for that or your lender does it by default. Otherwise your payment stays the same and the term gets shorter. Check with your lender.
Can I get my overpayments back?
Usually not. Some flexible or offset mortgages have a "borrow back" feature, but on most deals you'd need to apply for a further advance or remortgage.
Does overpaying affect my credit score?
Not directly. A lower balance does reduce your LTV, which can help you get a better rate when you remortgage.
What this means for you
Overpaying is one of the simplest ways to cut the cost of a mortgage, but it isn't right for everyone. Check your allowance, keep a cash buffer and weigh it against your other options first.
Quick Mortgages is a whole-of-market broker with a panel of 110+ lenders and no broker fees. If your deal is ending, we can show you how your balance affects your next rate and find deals that let you overpay.
Sources
- Quick Mortgages calculations: £200,000 repayment mortgage over 25 years at an illustrative 5%, monthly interest, figures rounded
- Low Incomes Tax Reform Group and Association of Taxation Technicians, Personal Savings Allowance 2026/27: £1,000 basic rate, £500 higher rate, £0 additional rate
- Autumn Budget 2025, as summarised by the Association of Taxation Technicians and Fidelity UK: savings income tax rates to rise by 2 percentage points and cash ISA limit to fall to £12,000 for under-65s from April 2027
- UK lender overpayment and early repayment charge terms, reviewed September 2026 (allowances commonly 10% a year on fixed rates)
Correct on 17 September 2026 and may change.
Disclaimer:
This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.
While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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