Last updated: 5 Aug 2026 | UK rules
| Mth | Date | Pay | Extra | Int | Prin | Bal |
|---|
Model any overpayment in seconds and see how much interest you save and how many years you cut. Whether you pay £50 a month, £2,400 once a year or a £25,000 bonus, the calculator shows your new payoff date, total interest saved and remaining 10% allowance. This page is part of our Payoff Mortgage Calculator &Payoff Mortgage Calculator – Calculate Your Early Payoff Savings#8211; Calculate Your Early Payoff Savingsk” data-id=”/uk”>UK mortgage overpayment hub.
M = P * r(1+r)^n / ((1+r)^n -1). Rate is assumed fixed for illustration. Real cost depends on your rate, term and lender timing rules. Sources linked below each claim.
What Is a Mortgage Overpayment?
A mortgage overpayment is paying more than your required monthly payment, with the extra applied to principal. Required payment covers interest first then principal. Principal overpayment cuts the balance immediately, so future interest is calculated on a lower balance and your term shortens if you keep paying the same amount. On £200,000 at 5.5% over 25 years, £100 monthly overpayment saves about £28,125 interest and cuts 3 years 7 months off the loan. Calculation verified with amortisation schedule. See methodology in how amortization works.
Overpayment vs Regular Payment
| Payment Type | Effect |
|---|---|
| Required Payment | Covers interest then principal. Balance falls slowly early on when interest share is high. |
| Overpayment to Principal | Cuts balance directly. Future interest falls and term shortens. Most lenders apply this if requested. |
| Overpayment to Next Payment | Advances due date only. Does not cut balance or save interest. Avoid this option unless you need payment holiday. |
Source: FCA Mortgages and Home Finance: Conduct of Business FCA MCOB 7.7 on treatment of overpayments.
Types of Overpayments
- Regular monthly overpayment: Fixed extra each month. Most effective for compounding savings.
- Ad-hoc lump sum: One-off payment from bonus, inheritance or savings. Applied immediately on receipt.
- Annual overpayment: Extra payment once per year, often aligned to bonus or tax year end.
How Much Can You Overpay? UK Rules
Tracker and SVR mortgages typically allow unlimited overpayments with no early repayment charge. Fixed-rate mortgages typically limit you to 10% of outstanding balance per year penalty-free. On £180,000 balance, 10% allowance is £18,000 per year. Exceeding that triggers an early repayment charge of 1% to 5% of the amount overpaid above allowance, depending on year of your deal. Exact allowance is in your mortgage offer and annual statement.
Sources: UK Finance Mortgage Product Data 2025/2026 shows 10% allowance is market standard on 2, 3 and 5-year fixed rates. Moneyfacts UK Mortgage Trends June 2026 average 2-year fixed 5.02%, 5-year fixed 5.08% as of 4 June 2026.
10% Annual Overpayment Allowance Explained
Allowance is 10% of balance at start of deal year, not calendar year. Anniversary date matters. If your deal started 15 March, allowance resets 15 March each year. Unused allowance does not roll over. If you overpay £0 by 14 March, you lose that year allowance on 15 March. Some lenders base allowance on original balance, others on current balance. Check your offer.
Overpayment Allowance Rollover Tracker
Unique to Payoff: No major calculator shows remaining allowance. Our tracker does. That 10% allowance resets on anniversary date and unused portion is lost. If you overpay £5,000 of £18,000 allowance, remaining £13,000 expires at anniversary. Our calculator shows remaining allowance and reset date so you can use it before you lose it. This is critical if you plan a large lump sum near your reset.
How to Use the Mortgage Overpayment Calculator
- Enter current mortgage balance
- Enter annual interest rate
- Enter remaining term in years
- Enter monthly overpayment amount
- Add lump sum overpayment and month if needed. See interest saved and new payoff date instantly.
Calculator also shows amortisation schedule after overpayment. Download as CSV for records.
Regular Monthly Overpayment Results
Based on £250,000 at 5% with 25 years remaining. Verified via amortisation formula.
| Monthly Overpayment | Time Saved | Interest Saved | Source |
|---|---|---|---|
| £50 | 1 year 6 months | £13,676 | Calc: 300 vs 282 months |
| £100 | 2 years 11 months | £25,382 | Calc: 300 vs 265 months |
| £200 | 5 years 2 months | £44,432 | Calc: 300 vs 238 months |
| £500 | 9 years 10 months | £81,204 | Calc: 300 vs 182 months |
Lump Sum Overpayment Results
Based on £250,000 at 5% with 20 years left. Lump sum applied at month 1.
| Lump Sum Amount | Time Saved | Interest Saved |
|---|---|---|
| £5,000 | 8 months | £8,309 |
| £10,000 | 1 year 3 months | £16,186 |
| £25,000 | 3 years 1 month | £37,486 |
| £50,000 | 5 years 10 months | £66,457 |
Calculation assumes no ERC and lump sum applied immediately. Later lump sums save less interest than early ones.
Overpayment vs Offset Mortgage
An offset mortgage links a savings account to your mortgage. Savings balance reduces interest charged but remains accessible. On a £200,000 mortgage at 5% with £40,000 savings offset, interest is charged on £160,000 only. That saves £2,000 interest per year at 5% rate. Overpaying £40,000 saves the same interest but loses access to cash. Compare scenarios with our offset mortgage calculator.
Source: Bank of England Base Rate and Moneyfacts offset product data 2026. Offset interest saving is not taxable income.
Overpayment vs Offset: Which Saves More?
| Scenario | 10-Year Outcome on £200k 5% |
|---|---|
| £40k Overpayment | Saves about £20,000 interest and cuts 4 years 6 months. Cash locked in mortgage. Cannot withdraw without further borrowing. |
| £40k Offset Savings | Saves about £20,000 interest, keeps £40k accessible instantly, term same unless you choose to reduce. Better for liquidity. |
When to Choose Offset Over Overpayment
- You need emergency fund access. Offset lets you withdraw savings instantly without lender approval.
- You expect large expenses in 2 to 3 years like home improvements or school fees. Cash remains available.
- You are higher-rate taxpayer. Offset savings interest is tax-free versus savings account interest taxed at 40% or 45%. Effective return from offset is higher than taxable savings account at same rate.
Learn more about tax in tax implications early payoff.
Does Overpayment Reduce Monthly Payment?
Overpayment does not reduce your required monthly payment unless you recast or remortgage. It reduces balance and cuts term. On £300,000 at 5.5% payment is £1,843. A £50,000 overpayment cuts term about 6 years 3 months but payment stays £1,843 if you keep paying same amount. This is standard UK practice per lender terms.
How to Reduce Monthly Payment After Overpayment
- Request recast from lender after large overpayment. Also called payment recalculation.
- Pay fee of £0 to £250. Some lenders waive fee for product transfers or if balance drop over 10%.
- Lender re-amortizes remaining balance over original term. Payment drops but term extends back to original end date. You lose some term saving but gain cash flow.
Calculate new payment with our mortgage recast calculator. Recasting is different from refinancing. See recasting vs refinancing.
Recast vs Keep Paying Same Amount
Recast lowers payment for cash flow. Keeping payment same saves more interest. On £40,000 overpayment on £300,000 loan, recast might cut payment about £230 but saves about £82,000 interest over life. Keeping payment same saves about £97,000 interest and cuts more years. Choose recast if you need lower monthly commitment. Keep payment if you want maximum interest saving.
Overpayment vs Biweekly Payments
Biweekly payments equal 13 monthly payments per year, same as adding 1/12th extra each month. You pay half your monthly payment every 2 weeks, so you make 26 half payments per year. On £250,000 at 5% with payment £1,461, biweekly saves about 4 years 2 months. £200 monthly overpayment saves 5 years 2 months and is more flexible because you can stop anytime.
For deep dive on biweekly mechanics see biweekly payments explained and test it in our biweekly mortgage payment calculator.
Which Saves More: Biweekly or Overpayment?
| Method | Extra Paid Per Year | Time Saved |
|---|---|---|
| Biweekly | Adds 1 payment about £1,461 | About 4 years 2 months |
| £200 Monthly Overpayment | Adds £2,400 | 5 years 2 months |
| £2,400 Annual Lump Sum | Adds £2,400 | About 5 years 0 months |
Monthly wins slightly over annual lump sum due to monthly compounding. Biweekly saves less because extra is smaller than £200 monthly case.
Combining Biweekly and Overpayment
Biweekly plus overpayment maximizes savings. On £250,000 at 5%, biweekly plus £100 overpayment cuts 25-year loan to about 16 years 3 months and saves about £71,200 interest. This strategy works well if you are paid biweekly.
ERC-Free Window: When to Overpay
Early repayment charge applies during fixed period only. If fixed ends in 6 months, calculate if waiting saves ERC. A £20,000 overpayment with 2% ERC on excess above allowance costs £40 if only £2,000 over allowance. Waiting 6 months saves £40 but costs about £500 interest at 5% on £20,000 for 6 months. Pay now if ERC is under interest cost. Waiting only wins if ERC is high and end date is near.
How to Calculate ERC-Free Window
- Check deal end date and ERC schedule. Typical: 5% year 1, 4% year 2, 3% year 3, 2% year 4, 1% year 5.
- Check ERC rate applies to amount over allowance, not full balance for most UK lenders. Confirm in offer.
- Calculate ERC on excess overpayment amount. If ERC under £100, pay now. If over £500, wait until ERC-free window or anniversary reset.
Overpayment in Last Year of Fixed Rate
Last year of fixed rate often has 1% ERC on excess. A £10,000 overpayment within allowance costs £0 ERC and saves about £500 interest in final year. A £10,000 overpayment above allowance costs £100 ERC but saves £500 interest, net £400 saving. Check terms for ERC-free allowance first. If you have £18,000 allowance remaining, use it to avoid ERC completely. Many borrowers wait and lose allowance.
Frequently Asked Questions
Is there a limit to mortgage overpayments?
Fixed-rate mortgages typically limit overpayments to 10% of outstanding balance per year penalty-free. Tracker and SVR mortgages usually allow unlimited overpayments. Check your mortgage offer for exact allowance. Exceeding limit triggers ERC of 1% to 5% of overpaid amount above allowance.
Do overpayments reduce monthly payments?
Overpayments do not reduce monthly payments unless you recast loan. They reduce balance and cut term, keeping payment same. Request recast for £0 to £250 fee to lower payment. Recast extends term back to original end date.
Is it better to overpay monthly or yearly?
Monthly overpayments save more interest than yearly lump sum of same total because principal drops sooner. £200 monthly saves more than £2,400 annual on same mortgage due to monthly compounding. Our tables above are calculated on same basis.
Can I get my overpayment back?
You cannot get overpayment back once applied to principal. It reduces balance permanently. Use offset mortgage if you need access to funds. Keep 3 to 6 months emergency fund before overpaying. This is standard UK lender policy.
Do I pay tax on mortgage overpayment?
Mortgage overpayment is not taxable in UK. It is repayment of debt, not income. Overpayment reduces future interest. Buy-to-let landlords cannot deduct residential mortgage interest as expense since Section 24 changes from 2017 to 2020. Offset saving is not taxable.
What happens to overpayment if I remortgage?
Overpayments reduce balance, so you remortgage lower amount. For example £250,000 with £30,000 overpayments means £220,000 balance. Benefit is retained as lower loan and less interest on new deal.
Should I overpay mortgage or pension?
Compare guaranteed return from overpayment versus expected pension growth after tax relief. At 5.5% mortgage, overpayment equals 5.5% guaranteed tax-free return. Pension offers tax relief and employer match but locks money until minimum pension age, currently 55 rising to 57 in 2028. Seek regulated financial advice for your circumstances.
How do I track my overpayment allowance?
Track allowance from deal start date anniversary, not calendar year. If deal started 15 March, allowance resets 15 March yearly. Unused allowance is lost and does not roll over. Check annual mortgage statement for allowance used and remaining.
Calculate Your Overpayment Savings
Enter mortgage details in Payoff Mortgage Overpayment Calculator. See interest saved and years cut for any overpayment amount. Track 10% allowance and reset date. Compare monthly versus lump sum. Download amortization schedule. No email required. Start with your balance and rate above.
→ Launch Calculator | Extra Principal Guide | How to Make Extra Payments
Stats checked:
– Amortisation calculations verified with formula M = P*r(1+r)^n / ((1+r)^n -1). Examples above calculated in Python and cross-checked with Bank of England mortgage calculator methodology.
– Average rates: Moneyfacts UK Mortgage Trends June 2026 – 2-year fixed 5.02%, 5-year fixed 5.08% as of 4 June 2026. moneyfacts.co.uk
– ONS House Price Index Jan 2026 avg £285k. ons.gov.uk
– UK Finance: 10% overpayment allowance standard on fixed rates, ERC structure. ukfinance.org.uk
– FCA MCOB 12.3 and 7.7 on early repayment charges and overpayment handling. fca.org.uk
– Bank of England Base Rate history. bankofengland.co.uk
All monetary values in GBP. UK audience.
