How overpaying saves you money
Your mortgage charges interest on the balance you still owe. Overpay, even a modest amount each month, and that balance falls faster, so less interest builds up and you clear the mortgage sooner. Usually your monthly payment stays the same and it's the term that shortens, which is where the big saving comes from.
Should you overpay?
Overpaying tends to be worthwhile when your mortgage rate is higher than what your savings earn after tax, you've cleared any higher-interest debt, and you still have an emergency fund. If you'd be better off topping up a pension (especially with an employer match) or you might need the cash soon, think twice. Our mortgage rates guide helps you see where your rate sits.
Watch out for early repayment charges
Most fixed deals let you overpay up to 10% of the balance a year with no penalty. Go beyond that and you could face an Early Repayment Charge (ERC), often a percentage of the amount. Always check your lender's annual allowance first. If you're near the end of a deal, our remortgage guide covers your options.
Want to talk through whether overpaying or remortgaging is the smarter move for you? Debbie at DS Financial is happy to help, no pressure.
General information, not financial advice. The calculator is an estimate, your lender's exact figures may differ. Check your overpayment allowance before paying.