Monthly extra, lump sum, or both — see exactly what each saves you in interest and years
Every extra pound you put into your mortgage saves more than a pound — because it reduces the interest charged on the remaining balance every single month after that. Use the tabs below to model monthly overpayments, a lump sum, or compare both side by side.
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⚠️ You may be exceeding your annual 10% overpayment allowance. Most fixed-rate mortgages allow overpayments up to 10% of the outstanding balance per year without penalty. Above this, early repayment charges (ERCs) of 1–5% typically apply. Check your mortgage offer document or call your lender before proceeding.
Your Scenarios Compared
Interest & Term Breakdown
Year-by-Year Amortisation
How your balance, interest paid, and principal paid change each year — with and without overpayment.
What to do next
Monthly Overpayment vs Lump Sum — Which Works Better?
Both reduce the interest you pay, but they work differently. Monthly overpayments reduce your balance continuously — every month, the interest charged is calculated on a slightly smaller number. A lump sum has an immediate, larger impact on the day it's applied, but the benefit depends heavily on timing: the earlier in your mortgage term you pay it, the more interest it saves.
The compounding effect: On a £240,000 mortgage at 4.5%, every £1,000 applied to the balance today saves roughly £400–600 in interest over the remaining term — more if you're early in the mortgage, less if you're near the end.
Reduce Term or Reduce Payment?
When you overpay, most lenders give you a choice:
Reduce term
Pay off earlier
Keep the same monthly payment. Your mortgage ends sooner and you pay less total interest. Better if you want to be mortgage-free faster.
Reduce payment
Lower monthly cost
Keep the same term but reduce what you owe each month. Better if you need more cash flow flexibility now.
Reducing the term saves more interest overall. Reducing the payment gives you breathing room month to month. The right answer depends on your situation — but you can model both above.
The 10% Annual Overpayment Rule
Most UK fixed-rate mortgages allow you to overpay up to 10% of the outstanding balance per year without penalty. Above that, early repayment charges (ERCs) typically apply — often 1–5% of the amount overpaid. Always check your lender's terms before making large overpayments, especially if you're mid-fix.
⚠️ On a £240,000 balance, 10% = £24,000/year = £2,000/month maximum before ERC risk. If you're planning a large lump sum, time it for the start of your mortgage year or at the end of your fixed-rate period.
Overpay the Mortgage or Put It in Savings?
This is the right question to ask. Overpaying is effectively a guaranteed return equal to your mortgage rate — currently around 4–5% for most UK borrowers. A high-interest savings account or cash ISA may offer a similar or better rate after tax.
Rule of thumb: If your savings rate (after tax) exceeds your mortgage rate, keep the money in savings. If your mortgage rate is higher — or if you're a higher/additional rate taxpayer — overpaying often wins. Use the Savings Growth tool to compare directly.
Frequently Asked Questions
Does overpaying affect my credit score?
No — paying more than required is viewed positively by lenders. It won't negatively affect your credit score.
Can I overpay on any mortgage?
Most mortgages allow overpayments up to 10% of the balance per year without penalty. Variable rate and tracker mortgages often have no cap at all. Check your mortgage offer document or call your lender to confirm your specific allowance.
What if I'm on a tracker or variable rate?
Variable and tracker mortgages typically have no overpayment limit — you can pay as much as you like. The savings shown here will fluctuate as your rate changes, but the principle remains the same.
How do I actually make an overpayment?
Contact your lender directly — most now allow this via online banking or their app. Specify that the extra amount should reduce your balance (not simply be held as a payment in advance). Some lenders require written instruction for lump sums above a certain threshold.