Year-by-year comparison
| Year | Balance (standard) | Balance (overpaying) | Difference |
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How mortgage overpayments work
When you overpay your mortgage, the extra money goes directly towards reducing your outstanding balance. Because interest is calculated on the remaining balance, a lower balance means less interest each month, which creates a compounding effect over time.
The maths behind it
Where P is the loan amount, r is the monthly interest rate (annual rate / 12), and n is the total number of monthly payments. When you add an overpayment each month, the extra amount reduces the principal faster, meaning you pay less total interest and finish paying sooner.
The 10% annual overpayment rule
Most UK lenders on fixed-rate deals allow overpayments of up to 10% of the outstanding balance per year without triggering an early repayment charge. For a £200,000 mortgage, that means up to £20,000 in the first year. This limit typically resets on your mortgage anniversary date.
When overpaying makes sense
Overpaying is usually most effective when your mortgage interest rate is higher than the rate you can earn on savings after tax. Even small regular overpayments can save thousands over the life of a mortgage. For example, overpaying £200 per month on a £200,000 mortgage at 4.5% could save you over £30,000 in interest.
Keep an emergency fund first
Before committing to regular overpayments, make sure you have an emergency fund covering three to six months of expenses. Unlike savings accounts, money overpaid on a mortgage is not easily accessible unless your lender offers a borrow-back facility.
Worked examples
Each example below was run through the calculator above with the inputs shown. They assume a capital repayment mortgage, a rate that stays the same for the whole term, the same overpayment every month, and that your lender uses overpayments to shorten the term rather than lower your monthly payment.
£200,000 over 25 years at 4.5%, overpaying £200 a month
The normal payment is £1,111.66, so you pay £1,311.66 a month. Total interest falls from £133,499.49 to £97,219.09, a saving of £36,280.39, and the mortgage ends 6 years, 1 month early. Over a full year £200 a month adds up to £2,400, well inside a 10% allowance on a loan of this size.
£150,000 over 30 years at 5%, overpaying £100 a month
A smaller overpayment on a longer term. The payment rises from £805.23 to £905.23. Interest saved is £34,605.18 and the term shortens by 6 years, 5 months. Long terms carry more interest, so even modest overpayments go further on them.
£250,000 over 25 years at 4%, overpaying £500 a month
The payment goes from £1,319.59 to £1,819.59. Interest falls from £145,877.63 to £84,879.15, saving £60,998.48, and the loan is cleared 9 years, 7 months early. That is £6,000 a year of overpayments, so check it against your own allowance before you set it up.
Rules that change the answer
Your lender's overpayment allowance
The limit is set by your mortgage offer, not by law, and lenders word it differently. Some cap overpayments at 10% of the outstanding balance each year; Nationwide, for example, allows 10% a year of the original loan amount on products reserved since 29 May 2013 and has no cap on trackers reserved since 2 May 2014 (Nationwide: how overpaying affects your mortgage, checked 30 October 2026). Go over the limit during a fixed or discounted deal and an early repayment charge can apply. Your offer document states the charge and when the allowance resets.
Shorter term or lower payment
This calculator assumes your payment stays the same, so the overpayment shortens the term. Many lenders do the opposite by default. Nationwide, on the same page, says single overpayments of £500 or more lower your minimum monthly payment from the next month unless you change your preference, and smaller ones lower it at the next recalculation, such as a rate change. Lowering the payment still saves interest, but less than shortening the term, so tell your lender which you want.
How interest is charged
The calculator charges a twelfth of the annual rate each month. Lenders that charge interest daily credit an overpayment from the next day, so your real figures will differ slightly from these.
Common mistakes
Overpaying before checking savings rates. If your savings earn more after tax than your mortgage rate, saving may leave you better off, and the money stays easy to reach. A basic rate taxpayer can earn £1,000 of interest tax-free and a higher rate taxpayer £500 under the Personal Savings Allowance (GOV.UK: Tax on savings interest, checked 30 October 2026). Our compound interest calculator shows the savings side.
Using the original loan instead of today's balance. Enter what you owe now and the years left, from your latest annual statement. Using the original figures overstates both the interest and the saving.
Forgetting a rate change. A fixed or discounted deal ends on a set date. When yours does, run the calculator again with the new rate and remaining balance. For a fuller look at the choice, read our mortgage overpayment guide.
How this calculator works: it works out your standard monthly payment from the balance, rate and term, then runs the loan month by month twice, once with and once without the overpayment, and compares total interest and the month the balance reaches zero. Lender terms quoted above were checked on 30 October 2026. Every source is listed on our methodology page.