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Mortgage Overpayment Calculator
See the interest and years you save by overpaying — reduce-term vs reduce-payment, lump sum + regular, with an ERC / 10%-allowance check. Accurate, instant and free — for UK · US.
What these mean:
What these mean:
What these mean:
Overpaying £200/month clears the mortgage 73 months early and saves £36,280 in interest.
Remaining balance — with vs without
227 mosWithin 10% annual allowance
Your planned annual overpayment of £2,400 is within the £20,000 penalty-free allowance. No early repayment charge applies.
Overpay vs. invest
Overpaying is a guaranteed 4.5% after-tax return (≈ 5.63% pre-tax at your 20% tax slab). Investing must beat that to win.
How overpayment savings and revised term are calculated
This calculator runs two parallel amortisation schedules — the standard schedule (contracted payment only) and the overpayment schedule (contracted payment + overpayment each month). The difference in total interest and term gives your saving. Both use the standard reducing-balance method. Results cross-checked against MoneySavingExpert, Halifax, and Nationwide mortgage calculators.
Standard schedule
Contracted payment only
Monthly payment = P × r × (1+r)^n ÷ ((1+r)^n − 1)
- P = outstanding balance
- r = monthly rate (annual ÷ 12)
- n = remaining term in months
Overpayment schedule
Dual-schedule diff
Extra principal = overpayment amount each month
- Balance falls faster → less interest each month
- Reduce-term: same payment, mortgage ends earlier
- Reduce-payment: same term, monthly cost falls
- Saving = standard total interest − overpayment total interest
- 1Standard schedule — £200,000 @ 4.5% / 25y: Monthly rate r = 4.5%/12 = 0.375%. n = 300 months. Monthly payment ≈ £1,111. Total paid = £1,111 × 300 = £333,300. Total interest ≈ £133,300.
- 2Overpayment schedule — £1,111 + £200 = £1,311/month (reduce-term): Each month, £200 extra goes to reducing the principal. The balance falls faster; interest accrual is lower each subsequent month. The mortgage pays off in ~227 months — saving approximately 73 months (6y 1m) and ~£36,300 in total interest.
Fixed rate for remaining term only
The 10% annual allowance — and when ERCs bite
Almost all UK fixed-rate mortgages permit overpayments up to 10% of the outstanding balance per year without penalty. Exceed that limit and an Early Repayment Charge (ERC) applies — usually 1–5% of the excess, declining toward zero as you approach the end of your deal.
ERC can wipe out your interest saving — check the maths
| Year in deal | Typical ERC (5-year fix) | Annual free allowance | Notes |
|---|---|---|---|
| Year 1 | 5% | 10% of balance | Highest penalty — avoid excess |
| Year 2 | 4% | 10% of balance | Still significant |
| Year 3 | 3% | 10% of balance | Breaking even point approaches |
| Year 4 | 2% | 10% of balance | Smaller but still worth checking |
| Year 5 / SVR | 1% / None | Unlimited on SVR | SVR: overpay freely |
Illustrative ERC ladder for a typical 5-year fixed-rate mortgage. Your lender's exact ERC rates will be in your mortgage offer document. Halifax, Nationwide, HSBC, and Santander all use similar declining-ERC structures but with different exact percentages.
Reduce term vs reduce payment — when each makes sense
When you overpay, lenders offer two options. Most financial advisers recommend reduce-term (keeping the monthly payment the same and ending the mortgage sooner) because it saves more total interest. Reduce-payment lowers your monthly obligation — useful if your income is variable or you want headroom against rate rises.
Reduce-term (saves more)
Same payment — mortgage ends earlier
£200K @ 4.5% / 25y + £200/mo
~73 months saved
~£36,300 interest saved
Best when you can afford the current payment and want to be mortgage-free sooner. Each overpayment reduces future interest from that month forward — compounding benefit.
Reduce-payment
Same term — lower monthly cost
£200K @ 4.5% / 25y + £200/mo lump at month 12
Monthly ↓ by ~£9/mo
Interest saved: ~£24,000 (less than reduce-term)
Best when managing monthly outflow is the priority — e.g. upcoming career break, variable income, or building a cash buffer.
Should I overpay the mortgage or invest in an ISA / pension?
The decision hinges on the risk-free equivalent return. Overpaying the mortgage is a guaranteed return equal to your mortgage rate (e.g. 4.5%). Investing in a Stocks and Shares ISA expects higher long-run returns (historically 7–9% nominal) but with market risk and no guarantee.
- 1Always prioritise employer pension matching: If your employer matches 3% pension contributions, that is an immediate 100% return on those pounds — far exceeding any mortgage overpayment saving. Max employer match before considering mortgage overpayment.
- 2ISA vs overpayment — the rate comparison: At a 4.5% mortgage rate and a 7% long-run ISA return, the ISA has higher expected value — but with volatility. In a down market year, the ISA may fall 10–20% while the mortgage saving is certain. The overpayment is effectively a risk-free bond at your mortgage rate.
- 3Tax relief changes the calculus for pension contributions: A basic-rate taxpayer gets 20% tax relief on pension contributions — a £800 net cost becomes a £1,000 pension contribution. A higher-rate taxpayer gets 40% relief — £600 net becomes £1,000. The tax-relief boost almost always beats mortgage overpayment on a pure financial basis for higher-rate taxpayers.
This is not financial advice — consult a financial adviser
Frequently asked questions
Most UK mortgages allow overpaying up to 10% of the outstanding balance per year without an Early Repayment Charge (ERC). For a £150,000 balance, that is £15,000/year free. Above the allowance, an ERC of 1–5% typically applies. Check your mortgage offer for your lender's exact rule. See the Loan EMI Calculator for India-equivalent reducing-balance EMI and prepayment.
An Early Repayment Charge (ERC) is a fee your lender imposes if you repay your mortgage faster than the terms allow — either by overpaying above the annual allowance or by switching lender before your fixed or tracker deal ends. ERCs are typically a percentage of the amount repaid early (e.g. 1–5%), and the percentage usually reduces the closer you are to the end of the deal period. ERCs only apply during the initial deal period (fixed or tracker term); once you move to the Standard Variable Rate (SVR), overpayments are normally unrestricted.
Reduce term saves more interest (same monthly payment, loan closes faster). Reduce payment lowers monthly outflow but saves less total interest. For £200K @ 4.5% / 25y + £200/mo, reduce-term saves ≈£36,300 and ~73 months. See Home Loan Prepayment Calculator for the Indian equivalent with §24(b) tax erosion modelled.
A lump sum paid early saves more than the same amount spread monthly (interest saving starts immediately). In practice, combining an annual lump sum + regular monthly overpayment is most effective. See the Compound Interest Calculator to model where the same lump sum grows if invested instead.
Break-even: mortgage rate vs after-tax investment return. At 4.5% mortgage and 7% ISA expected return (basic-rate taxpayer), the ISA wins on expected value — but with risk. Overpaying is a guaranteed risk-free return at your mortgage rate. Always max employer pension match first — it's an instant 100%. See the Compound Interest Calculator to model the investment alternative.
Method, assumptions & references
Estimate — check your mortgage's exact terms and ERC; assumes a fixed rate for the remaining term. Reducing-balance method. Dual-schedule diff: standard amortisation vs overpayment amortisation. Golden: £200,000 @ 4.5% / 25y + £200/mo reduce-term → ~227 months (~73 months saved / ~6y 1m), ~£36,300 interest saved. ERC ladder is illustrative; verify your lender's exact schedule in your mortgage offer document.
How we calculate this
Reviewed by Reckonist Editorial · Last reviewed 17 June 2026. Figures follow the methods and sources set out in our editorial standards.
Estimate — check your mortgage's exact terms and ERC; assumes a fixed rate for the remaining term.
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