How Do Mortgage Overpayments Work?
This guide is for general information only and does not provide financial advice. Check your lender’s terms before overpaying, as early repayment charges may apply. Your home may be repossessed if you do not keep up repayments on your mortgage.
A mortgage overpayment is money you pay on top of your required monthly payment. It reduces the amount you owe, and because interest is charged on what you owe, a lower balance means less interest. Whether your lender uses the overpayment to shorten your term or to lower your payment, and how much you can overpay without a charge, depends on your lender and your mortgage.
What happens to an extra payment
- The extra money is applied to your balance, so you owe less than you would have.
- Interest is worked out on the lower balance, so each month a little less of your payment goes on interest and a little more reduces the balance.
- If your payment stays the same, the mortgage ends sooner. Some lenders lower the payment instead and keep the end date.
A worked example
Take a £200,000 mortgage at 4.5% with 25 years remaining and a payment of £1,111.66 a month. The table shows the estimated effect of one overpayment made now, assuming the rate stays the same, your payment stays the same and there are no charges.
| One-off overpayment | Estimated result |
|---|---|
| £5,000 | about £9,956 of interest saved, 1 year 1 month sooner |
| £10,000 | about £19,197 of interest saved, 2 years 2 months sooner |
| £20,000 | about £35,778 of interest saved, 4 years 2 months sooner |
What to check with your lender
- How much you can overpay each year without a charge. See the UK mortgage overpayment cap and what an early repayment charge is.
- Whether overpayments shorten the term or lower the payment, and whether you can choose. See shortening your term or lowering your payment.
- How to make an overpayment, and how quickly it reaches your balance. See how to overpay your mortgage.
You can try your own figures in the calculator, or open the calculator with this balance, rate and term (a £200 monthly overpayment is pre-filled, which is different from the one-off amounts in the table).
Figures are estimates from this site’s calculator. They assume a repayment mortgage, a rate that stays the same for the whole term and no fees or early repayment charges, and they are illustrations, not forecasts. Try your own figures in the free mortgage overpayment calculator.
If you are unsure whether overpaying suits you, consider speaking to a regulated mortgage adviser.
Questions people ask
Do overpayments reduce my monthly payment?
It depends on your lender. Some keep your payment the same and shorten the term, some lower the payment instead, and some let you choose. Check your mortgage terms or ask your lender.
Is there a limit on how much I can overpay?
Some mortgages set a yearly limit, often as a percentage of the balance. Check your mortgage offer. Lenders’ own wording is on our lender pages. See the UK mortgage overpayment cap.
Can I get overpaid money back?
It depends on your mortgage. Some lenders offer ways to borrow back, and others do not. Check before you overpay.
Related guides
whether you pay interest on overpayments, what happens if you pay more each month, how many extra payments a year, changing your term when you remortgage. See also how to overpay your mortgage, should I overpay my mortgage? and how much should I overpay?