A mortgage overpayment is any repayment above your contracted monthly amount. Every pound of overpayment goes directly to your outstanding balance, reducing the interest charged in every subsequent month.
US and Canadian borrowers: this page covers the same concept — "extra payments" — with the engine returning identical results. The term "overpayment" is common in the UK and Australia; "extra payment" or "prepayment" is more common in North America. Switch the currency using the selector in the calculator to change the currency symbol and vocabulary to match your market.
The UK overpayment allowance: what you need to know
Most UK fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without triggering an early repayment charge (ERC). This is set by the lender, not by law — check your specific mortgage terms. On a £200,000 balance, 10% is £20,000 per year, or roughly £1,667 per month, which exceeds most borrowers' practical capacity.
Tracker and standard variable rate (SVR) mortgages in the UK typically allow unlimited overpayments, because there is no fixed-rate lock-in. If you are on a tracker or SVR, the full savings shown by the calculator are available to you without ERC risk.
If you are within a fixed-rate period, stay under the 10% threshold — or time lump-sum overpayments to land just after your fixed period ends and before the next one begins.
How overpayments reduce your mortgage term
Each overpayment reduces your outstanding balance. Next month, interest is charged on a lower balance, so slightly more of your contracted repayment also goes to principal. This compounds: each overpayment accelerates all future principal reduction.
The term reduction is non-linear. Overpaying early in the mortgage saves dramatically more than overpaying late, because there are more remaining months to avoid interest on. A £150/month overpayment on a £200,000 / 5.5% / 25-year mortgage cuts years from the term — the exact figure depends on the remaining balance and rate; the calculator shows it precisely for your numbers.
Lump-sum overpayments: remortgage windfalls
A remortgage (switching to a new lender or deal) is an ideal time to make a lump-sum overpayment — there are no ERCs in the gap between deals, and the new balance at the new rate means every pound of reduction has a fresh amortization impact.
Use the "One-time lump sum" field and set "Apply at month 1" to simulate a lump sum at the start of the period. For a mid-term lump sum (e.g., after a property sale, inheritance, or bonus), set the month accordingly to see the precise remaining-term and interest-saved calculation.
Frequently asked questions
What is a mortgage overpayment?
A mortgage overpayment is any payment above your contractual monthly repayment. It reduces your outstanding balance directly, which lowers the interest charged in all subsequent months and shortens your remaining mortgage term. In the US and Canada, the same concept is called an "extra payment" or "additional principal payment."
Will my lender apply my overpayment to the balance or next month's payment?
This varies by lender. In the UK, most lenders automatically apply overpayments to reduce the outstanding balance. In the US, you may need to specify "apply to principal only" — otherwise your servicer might credit the overpayment as an advance payment toward next month's scheduled repayment, which reduces interest savings significantly. Always confirm with your lender.
Is it better to overpay my mortgage or put the money in savings?
If your mortgage rate is higher than the after-tax interest you earn on savings, overpaying wins mathematically. With UK savings rates at 4–5% and mortgage rates often above 5%, many borrowers are in an overpayment-wins scenario. However, once you overpay, the money is locked in your property. Keeping 3–6 months of expenses as liquid savings first is prudent before committing extra to the mortgage.
How do I check my UK lender's early repayment charge (ERC) allowance?
Your mortgage offer document (the binding offer from your lender) will state the ERC schedule and the annual overpayment allowance (typically 10% of the outstanding balance). You can also call your lender's mortgage servicing line or log into your online account to see the current allowance and how much you have already used in the current year.
Worked examples
Regular overpayment — UK standard mortgage
£250,000 at 5% for 25 years (common UK term), with £500/month overpayment. Demonstrates the compound benefit of regular overpayments on a shorter initial term.
Payoff time
15 yr 3 mo
Time saved
9 yr 9 mo
Total interest
$107,238
Interest saved
$81,204
Base schedule: 300 months, approximately £185,000 total interest. With £500/month overpayment: payoff in approximately 190 months (saving 110 months — over 9 years), total interest reduced by roughly £80,000. The £500/month over 190 months costs £95,000 in extra payments and returns approximately £80,000 in interest savings — a near 1-for-1 return on every pound of overpayment.
Annual lump sum overpayment — within UK 10% allowance
£300,000 at 6% for 25 years, with a £15,000 lump sum applied at month 12 (within the typical 10% per year overpayment allowance).
Payoff time
22 yr 6 mo
Time saved
2 yr 6 mo
Total interest
$236,290
Interest saved
$43,581
Base schedule: 300 months, over £255,000 in total interest. With £15,000 lump sum at month 12: payoff shortened by approximately 22 months, total interest reduced by roughly £37,000 — a 2.5× return on the lump-sum principal. Critically, the £15,000 represents exactly 5% of the original £300,000 balance, well within the 10% annual overpayment limit most fixed-rate UK deals allow without an ERC.
Shorter-term UK mortgage with moderate overpayment
£180,000 at 4.5% for 20 years, with £250/month overpayment.
Payoff time
14 yr 10 mo
Time saved
5 yr 2 mo
Total interest
$66,965
Interest saved
$26,340
Base schedule: 240 months, approximately £103,000 total interest. With £250/month overpayment: payoff in approximately 187 months (saving 53 months — 4 years 5 months), total interest approximately £76,000 — saving £27,000. At 4.5%, the guaranteed return is moderate; however, this is after tax (no investment tax efficiency assumed on the mortgage interest saving).
Months saved by overpayment on a £250,000, 25-year mortgage
UK-style 25-year (300 month) base term. Computed by the payoffDelta engine.
| Monthly overpayment (£/$) | 4% | 5% | 6% | 7% | 8% |
|---|---|---|---|---|---|
| $200/mo | 5y 1m | 5y 2m | 5y 4m | 5y 7m | 5y 10m |
| $300/mo | 6y 10m | 7y 0m | 7y 3m | 7y 5m | 7y 8m |
| $500/mo | 9y 7m | 9y 9m | 10y 0m | 10y 2m | 10y 5m |
| $750/mo | 12y 1m | 12y 2m | 12y 4m | 12y 7m | 12y 9m |
| $1000/mo | 13y 10m | 13y 11m | 14y 1m | 14y 3m | 14y 5m |
UK mortgages are commonly 25-year terms. Higher rates produce larger savings from the same overpayment amount because each extra pound eliminates more compounding interest.
What affects your loan outcome
Early repayment charge (ERC) threshold
UK fixed-rate mortgages during the fixed term typically permit overpayments of up to 10% of the outstanding balance per year without triggering an ERC. Overpaying beyond that threshold incurs a charge — often 1–5% of the excess amount — which can negate the interest saving from the overpayment. Know your annual allowance before making large lump-sum payments during a fixed period.
Size of overpayment relative to balance
Overpayment savings scale with the amount overpaid and are multiplicative with the remaining term. A £500/month overpayment on a 25-year £250,000 mortgage saves far more than the same £500 on a 10-year £100,000 mortgage, because the base loan has more periods for compound interest to be eliminated.
Tracker vs fixed rate
Tracker mortgages (rate moves with a base rate) typically have no ERC and allow unlimited overpayments. Fixed-rate mortgages carry the 10% cap during the fixed period. On a tracker, you can overpay without restriction — but the rate itself may change, altering the savings from each overpayment period to period.
More loan questions
What is the difference between overpayment and extra payment?
They mean the same thing — any payment above the required monthly instalment applied to reduce the outstanding balance. "Overpayment" is the standard UK term; "extra payment" is more common in the US and Australia. "Additional repayment" is used in Australia. This calculator uses the terms interchangeably; enter your monthly amount in the extra payment field regardless of regional vocabulary.
Can I get my overpayments back if I need the cash?
On a standard repayment mortgage, no — once paid, overpayments cannot be re-drawn. However, some lenders offer "flexible" or "offset" mortgages that allow you to draw back overpayments, or link a savings account to offset the balance. Check your mortgage type with your lender. If liquidity is a concern, maintaining an emergency fund and overpaying only surplus cash — rather than cash you might need — is the conservative approach.
How much can I overpay on my mortgage per year without a penalty?
In the UK, most fixed-rate mortgage deals allow overpayments of up to 10% of the outstanding balance per year without an early repayment charge. For example, on a £200,000 balance, you could overpay up to £20,000 in a mortgage year without penalty. Tracker and variable-rate mortgages typically have no overpayment limit. In the US and Australia, the vast majority of mortgages allow unlimited prepayments without penalty. Always verify your specific mortgage terms with your lender.
What this calculator computes — and what it does not
This calculator models fixed-rate, fully amortizing loans using the standard amortization formula. A number of real-world factors are outside its scope.
- 1.Results are estimates, not guarantees. Actual loan costs depend on the exact terms in your loan agreement, any fees charged at origination, how the lender applies payments, and whether you make every payment exactly on schedule. This calculator assumes all payments are made on time with no changes.
- 2.Interest rates are user-supplied, not live market data. This tool does not connect to any rate feed. The rate you enter should come from a lender quote or your loan agreement. Current rates vary by lender, credit score, loan type, and market conditions — this calculator cannot provide those figures.
- 3.Property taxes, insurance, and PMI are excluded unless toggled on. The payment computed here is principal and interest only. For a mortgage, your total monthly obligation includes property taxes, homeowners insurance, and PMI (if your down payment is under 20%) — collected in escrow by most lenders. These can add $200–$800 or more per month to the P&I payment shown.
- 4.APR vs. interest rate. This calculator uses the stated interest rate for payment math. APR (Annual Percentage Rate) is always higher than the interest rate because it spreads lender fees over the loan term. APR is the correct metric for comparing loan costs across lenders; the stated rate is the correct input for computing the payment schedule.
- 5.Variable-rate loans cannot be accurately projected. This calculator models fixed-rate amortization only. For adjustable-rate mortgages (ARMs), tracker mortgages, or variable-rate personal loans, the payment changes when the rate resets — the full-term projection would require assumptions about future rates that cannot be known in advance.
This calculator is for educational and planning purposes only. It does not constitute financial, mortgage, or legal advice.