When Does Your Mortgage Overpayment Allowance Reset?

Your overpayment allowance usually resets once a year, but the date depends on your lender. Some measure the year from the date your mortgage started, some from the start of your current deal and some use the calendar year. Your mortgage offer or your lender will tell you, and it matters if you are planning a lump sum, because two payments either side of the reset may be treated differently from the same amount paid in one year.

This guide is about the timing. For how the limit works and what can happen if you go over it, see the UK mortgage overpayment cap.

Mortgage year or calendar year

• From the date your mortgage started: the year runs from that date each year, often called your mortgage anniversary.
• From the start of your current deal: a new deal can start a new allowance year.
• Calendar year: for some lenders the allowance follows the calendar year.

Do not assume. The date is set by your lender’s terms, and it can change if you take a new deal.

What the allowance is measured on

Many lenders set the allowance as a percentage of your balance at the start of the mortgage year, so it changes a little each year as your balance falls. Some use the original loan amount instead. Regular overpayments and lump sums usually count towards the same allowance, together with anything you have already overpaid that year.

Does unused allowance carry forward?

It depends on your lender. Some treat the allowance as use it or lose it each year, so an allowance you did not use may not add to next year’s. Check your mortgage terms.

Why the timing of a lump sum can matter

As an illustration, take a £200,000 balance and a 10% yearly allowance, which is £20,000, with an assumed 3% charge on the amount over the allowance. If you paid a £30,000 lump sum in one mortgage year, that is £10,000 over the allowance and the estimated charge would be £300. If you instead paid £15,000 shortly before the reset and £15,000 shortly after it, each payment is within a £20,000 allowance, so, on these figures, you might not be charged, if your lender’s terms allow it. In practice the second year’s allowance is recalculated on your new balance, and some lenders look at payments over a rolling twelve months instead, so this is only an illustration of why the reset date can matter.

Figures are estimates from this site’s early repayment charge calculator. The 3% is an example only: charges vary by lender and deal.

How to find your reset date

• Check your mortgage offer for the date your mortgage or deal started.
• Look at your annual mortgage statement, which may state your allowance and the year it covers.
• Ask your lender to confirm the date in writing before you make a large payment.

If you are unsure, consider speaking to a regulated mortgage adviser. Our guide to lump sum versus monthly overpayments compares the two ways of paying.

Questions people ask

Is my overpayment allowance based on the calendar year?
Sometimes, but often it is not. Some lenders measure it from the date your mortgage started, some from the start of your current deal, and some use the calendar year. Your mortgage offer or your lender will say.

Can I carry unused allowance into next year?
It depends on your lender. Some treat the allowance as use it or lose it each year, so unused allowance may not carry forward. Check your mortgage terms.

Is the allowance a percentage of my current balance?
It is often a percentage of the balance at the start of the mortgage year, but some lenders use the original loan amount instead. Your mortgage offer explains which applies.

Where to go next

See what an early repayment charge is and how much to overpay.