Check your lender's ERC-free overpayment allowance (usually 10%/yr).
What is a mortgage overpayment?
A mortgage overpayment is any amount you pay above the contractual monthly payment. It comes straight off the capital, so later interest is calculated on a smaller balance. The same extra payment saves more interest early in the term than near the end, because the balance stays lower for longer.
Most UK lenders let you overpay up to 10% of the balance each year without an early repayment charge. Paying more than that allowance can trigger a fee that wipes out the saving. This calculator shows the interest saved and the time taken off the term from a monthly or lump-sum overpayment. Check your offer before you pay more than the penalty-free allowance.
On a £200,000 mortgage, overpaying £200/month saves £37,364 in interest and clears the mortgage 6y 1m earlier.
How overpayment size affects the outcome
How mortgage overpayments work
Interest compounds on the balance
Every month your lender charges interest on your outstanding balance. Overpayments reduce that balance, so next month's interest is lower. The saving compounds over the remaining term.
Check the 10% rule
Most fixed-rate mortgages let you overpay up to 10% of the balance each year with no Early Repayment Charge (ERC). Go over, and you'll typically pay 1–5% ERC on the excess.
Frequently asked questions
How much can I overpay on my mortgage without penalty?
Most UK lenders let you overpay up to 10% of the outstanding balance each year without an Early Repayment Charge. Some lenders (e.g. tracker or offset products) allow unlimited overpayments. Always check your mortgage offer.
Is it better to overpay or save?
Generally yes if your mortgage rate exceeds the after-tax return on your savings. On a 4.6% mortgage, every £1 overpaid saves ~4.6% — hard to beat with a risk-free savings account. But keep an emergency fund first.
Should I shorten the term or reduce the monthly payment?
Overpaying shortens the term by default — you pay the same and clear sooner. Some lenders let you use overpayments to reduce future monthly payments instead. Shortening the term saves more interest overall.
Does a lump sum save more than monthly overpayments?
A lump sum saves more per pound because it reduces the balance immediately. But regular overpayments are easier to sustain. Combine both where possible.
Will my lender change my direct debit after an overpayment?
Depends on the lender and product. Fixed-rate lenders usually keep the DD the same and reduce the term. Tracker/variable lenders often recalculate and lower the DD. Ask your lender which method they use.
Reviewed by the Mortgage118 editorial team. Calculation uses a monthly amortisation model with end-of-month payments. Individual lender methods vary; check your mortgage offer.
- Method
- Monthly amortisation
- Payment timing
- End of month
- Rate treatment
- Fixed for term
Most UK lenders cap penalty-free overpayments at 10% of the balance per year. Check your product terms.