What this calculator works out
This calculator compares two futures for the same mortgage: paying the contractual amount, and paying a little more each month. It shows how many months earlier the mortgage clears and how much interest that saves.
It works by simulating the balance month by month under both scenarios, which is how a repayment mortgage actually behaves. The saving comes from removing capital early, so that every remaining month accrues interest on a smaller balance.
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Before you overpay
- Check your lender's overpayment allowance. Fixed-rate deals commonly permit 10% of the balance each year; exceeding it can trigger an early repayment charge that wipes out the saving.
- Confirm the overpayment reduces the term rather than the monthly payment. Reducing the payment gives back most of the benefit — you usually have to ask for term reduction explicitly.
- Clear higher-rate debt first. A credit card at 24% costs far more than a mortgage at 4.5%.
- Keep an emergency fund. Money paid into a mortgage is difficult to get back out, and a further advance is not guaranteed.
Interest is charged on the outstanding balance, so a pound removed in year one avoids interest for the whole remaining term. The same pound paid in the final year avoids almost none. Overpayment is one of the few financial decisions where starting sooner matters more than the amount.
How this calculator works
The calculator first derives the contractual payment, then runs the balance forward twice:
r = rate ÷ 12 ÷ 100, n = years remaining × 12
Contractual payment = balance × r ÷ (1 − (1 + r)−n)
Each month: interest = balance × r, then balance = balance + interest − paymentThe second run adds your overpayment to the same contractual payment and repeats until the balance clears, so the comparison isolates the effect of the extra money alone.
It assumes the interest rate stays fixed for the whole remaining term, which is a simplification — most UK mortgages are fixed for two to five years and then revert. Re-run the figures whenever you remortgage.
Worked example: £100 a month on a £180,000 mortgage
Using the default figures — a £180,000 balance at 4.5% with 20 years remaining, overpaying £100 a month:
- Contractual payment: £1,138.77 a month
- Without overpaying: 240 months and £93,304.53 of interest
- Paying £1,238.77: 211 months and £80,539.72 of interest
- Result: mortgage clears 29 months early, saving £12,764.81
The overpayments themselves total £21,100 across those 211 months. In exchange you avoid £12,765 of interest and finish nearly two and a half years sooner. That is an effective return equal to your mortgage rate, guaranteed and tax-free — which is why overpaying is usually a better use of spare money than a savings account paying less than the mortgage charges.
Common mistakes
- Letting the lender reduce the payment instead of the term. This returns most of the benefit to the lender; ask for term reduction.
- Exceeding the annual overpayment allowance. Early repayment charges are typically a percentage of the balance and can be substantial.
- Overpaying while carrying credit card debt. Clear the expensive debt first.
- Emptying savings into the mortgage. The money becomes very difficult to access again.
- Assuming the rate will hold. Re-run the calculation each time you remortgage.
Frequently asked questions
Should I overpay or save instead?
Compare your mortgage rate against the after-tax return on savings. Overpaying at 4.5% is equivalent to a guaranteed, tax-free 4.5% return, which is hard to beat in a savings account once tax is accounted for. Savings win on flexibility, and that flexibility has real value — which is why the usual advice is to build an emergency fund first and overpay with what is genuinely spare.
Should I overpay or put more into a pension?
For a higher rate taxpayer, pension contributions are often the stronger choice because of tax relief at 40% plus any employer match, which is a larger immediate uplift than most mortgage rates. For a basic rate taxpayer the answer is closer and depends on your rate, your age and how much you value clearing the mortgage before retirement.
Is a lump sum or a regular overpayment better?
Whichever gets money onto the balance soonest. A lump sum early beats the same amount spread over years. In practice regular overpayments are easier to sustain and easier to stop if circumstances change, and many lenders let you set them up as a standing order alongside the normal payment.
What is an early repayment charge?
A fee for repaying more than your agreement permits during a fixed or discounted period, usually a percentage of the balance that steps down over the deal term. It is disclosed in your mortgage offer. Overpaying within the annual allowance avoids it; check the allowance before making a large one-off payment.
Does overpaying affect my credit file?
Not negatively. Reducing your mortgage balance lowers your total indebtedness, which is generally viewed positively. There is no penalty on your credit file for paying a debt down faster.
Related tools
References
- MoneyHelper — guidance on mortgage overpayments, allowances and early repayment charges
- Financial Conduct Authority — mortgage conduct rules including disclosure of early repayment charges
Sources are checked at publication and can change — how I choose and check references.