How Does Your Mortgage Rate Change What Overpaying Does?
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.
The same overpayment does different amounts of work at different interest rates. At a higher rate each pound you owe costs more to carry, so reducing the balance tends to save more interest, and at a lower rate it saves less. This page shows how large the difference can be, as an illustration.
The same overpayment at six rates
For a £200,000 balance with 25 years remaining and £200 a month overpaid, the estimates are:
| Interest rate | Interest without overpaying | Estimated interest saved | Estimated time saved |
|---|---|---|---|
| 2% | about £54,312 | about £13,379 | about 5 years 10 months |
| 3% | about £84,527 | about £21,623 | about 5 years 11 months |
| 4% | about £116,703 | about £31,067 | about 6 years |
| 5% | about £150,754 | about £41,843 | about 6 years 2 months |
| 6% | about £186,582 | about £54,079 | about 6 years 4 months |
| 7% | about £224,067 | about £67,897 | about 6 years 7 months |
The figures assume the rate stays the same for the whole 25 years, which is unlikely to be true. Fixed deals end, and variable rates move, so treat each row as a picture of how the rate matters, not a forecast for your mortgage.
What this means for your own mortgage
- When your deal ends and your rate changes, repeat the calculation with the new rate in the free mortgage overpayment calculator.
- A higher rate raises what overpaying could save. If you are thinking of paying an early repayment charge to overpay, see whether it is worth paying an early repayment charge.
- If your rate is variable, read can you overpay a tracker or variable rate mortgage?
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
Does overpaying save more when my rate is higher?
Other things being equal, it tends to reduce more interest when your rate is higher, because each pound of balance costs more to carry. The table shows the same overpayment at six rates. Whether overpaying is right for you also depends on your savings and cash needs.
What happens if my rate changes during the mortgage?
Any estimate that assumes one rate for the whole term will be off. Your rate may change when a fixed deal ends or if you have a variable rate, so repeat the calculation with your new rate. See overpaying during a fixed rate.
Is overpaying worth it when rates are low?
It can still reduce your interest, but by less. Whether overpaying or saving suits you depends on your savings rate after tax and how much cash you need: see overpaying versus savings accounts.
Other worked examples
overpaying £200 a month, overpaying £300 a month, overpaying £500 a month, overpaying £1,000 a month, how much to overpay to clear your mortgage sooner. For how much to overpay in general, see how much should I overpay?