Mortgage Overpayment Calculator

Yes, it can be. But it really depends on your particular circumstances. Overpaying means you’ll repay your mortgage debt quicker and, over a longer period, you should save a lot on the interest payments. 

The choice you need to make is whether overpaying on your mortgage will save more interest than you could earn from saving the amount you want to overpay. If the interest rate on your mortgage is higher than the savings rates available elsewhere, making overpayments would make more sense. 

You can use our handy calculator (above) as a guide for what you could potentially save, based on your current mortgage balance and rate. It’s also important to check that the amount you want to overpay won’t incur any additional charges on your mortgage (see below). 

Your lender will be able to confirm exactly how you’re allowed to overpay (and by how much without incurring fees). In most cases, you can overpay by increasing your monthly payments or a one-off lump sum (or a combination of the two). 

Most people prefer to overpay on their monthly mortgage repayments, as it can be more straightforward and easier to budget for. With larger lump sums, it’s important to speak with your mortgage lender beforehand to make sure it is timed correctly (before an annual interest calculation is made) to ensure you save on the interest for that year. 

Fixed-rate mortgages usually have an annual overpayment allowance (AOA), and in most cases, this is equivalent to 10% of your outstanding mortgage balance. So, you could overpay up to this amount without incurring any early repayment charges (ERCs) or additional fees. 

For example, if your current mortgage balance is £150,000 and your AOA is 10%, you could overpay by up to £15,000 over the next year without incurring any additional charges. 

Bear in mind that your AOA may vary from lender to lender. Therefore, it’s essential to review your specific mortgage agreement carefully before making any overpayments. The actual amount you can overpay will also alter each year as your mortgage balance reduces. 

Most variable-rate mortgages allow you to make overpayments without any restrictions or incurring an early repayment charge (ERC). For example, a standard-variable rate (SVR) mortgage allows for unrestricted overpayments, so you can overpay by however much you want without paying any additional fees. 

However, some lenders may impose an annual overpayment allowance on certain tracker mortgages. If you currently have this type of mortgage deal, you should check with your lender first before committing to any specific overpayment amounts. 

Interest-only mortgages work differently from a traditional repayment mortgage, as you only repay the interest element to the lender each month and have a separate repayment vehicle to repay the capital amount as one lump sum at the end of the term. 

So, if you overpay, whilst you could save money on the interest overall, you won’t be able to repay the mortgage in full until you have enough funds for the capital amount. In this instance, it may be worth considering how you could overpay on the capital repayment vehicle, as well as the interest, to fully repay your mortgage more quickly.