Remortgaging or Overpaying: Two Ways to Reduce Mortgage Interest
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.
Remortgaging and overpaying both aim to reduce what your mortgage costs, but they work differently. Remortgaging changes the rate (and often other terms) on the money you owe. Overpaying reduces the amount you owe. They are not alternatives that exclude each other, and whether either suits you depends on the rate you could get, any fees or charges, and your circumstances.
A worked example
Take a £200,000 balance at 4.5% with 25 years remaining. The table compares the estimated interest over the rest of the term if you keep your current rate, if a lower example rate applied to the same balance, and if you overpay £200 a month at 4.5%. The lower rates are examples only, and the table ignores fees, charges and any change to your term. It assumes each rate stays the same for the whole term, and that the overpayment is allowed under your mortgage terms with no charge.
| Option | Estimated total interest | Estimated difference |
|---|---|---|
| Keep 4.5%, no overpayment | £133,501 | none |
| Example rate of 4.0%, no overpayment | £116,703 | about £16,798 less |
| Example rate of 3.5%, no overpayment | £100,374 | about £33,127 less |
| Example rate of 3.0%, no overpayment | £84,527 | about £48,974 less |
| Keep 4.5%, overpay £200 a month | £97,220 | about £36,281 less, 6 years 1 month sooner |
The two can also be combined: a lower rate and an overpayment each reduce interest, and the overpayment works on whatever rate applies.
Questions worth asking
- What would it cost to change, for example fees or an early repayment charge on your current deal? See remortgage fees and the break-even point.
- When does your current deal end, and what happens to your payment then? See what your payment could be when your deal ends.
- Would the new mortgage allow overpayments, and up to what amount?
Figures are estimates from this site’s calculator, using the assumptions stated above each table. The rates, fees and property values shown are examples, not figures that are available to you. They are illustrations, not forecasts. Try your own figures in the free mortgage overpayment calculator.
If you are thinking about remortgaging or overpaying, consider speaking to a regulated mortgage adviser. This page is general information, not advice on your circumstances.
Questions people ask
Is remortgaging better than overpaying?
Neither is better for everyone. A lower rate and an overpayment each reduce interest, in different ways, and what is available to you, and at what cost, depends on your circumstances. You may want to speak to a regulated mortgage adviser.
Can I remortgage and overpay?
It can be possible to do both, but each mortgage has its own terms on overpayments. Check the terms of any mortgage before you commit.
Does overpaying change the rate I can get?
It can change your balance and therefore your loan-to-value, which lenders may take into account. See overpaying before you remortgage and loan-to-value.
Other ways to look at it
what a lower mortgage rate could save, remortgage fees and the break-even point, overpaying before you remortgage and loan-to-value, a shorter term or overpaying, what your payment could be when your deal ends. For how overpayments and remortgaging interact more generally, see what happens to overpayments when you remortgage and how overpayments affect your remortgage rate.