A mortgage overpayment is any repayment above your contracted monthly amount. Every pound of overpayment goes directly to your outstanding balance, reducing the interest charged in every subsequent month.
US and Canadian borrowers: this page covers the same concept — "extra payments" — with the engine returning identical results. The term "overpayment" is common in the UK and Australia; "extra payment" or "prepayment" is more common in North America. Switch the currency using the selector in the calculator to change the currency symbol and vocabulary to match your market.
The UK overpayment allowance: what you need to know
Most UK fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without triggering an early repayment charge (ERC). This is set by the lender, not by law — check your specific mortgage terms. On a £200,000 balance, 10% is £20,000 per year, or roughly £1,667 per month, which exceeds most borrowers' practical capacity.
Tracker and standard variable rate (SVR) mortgages in the UK typically allow unlimited overpayments, because there is no fixed-rate lock-in. If you are on a tracker or SVR, the full savings shown by the calculator are available to you without ERC risk.
If you are within a fixed-rate period, stay under the 10% threshold — or time lump-sum overpayments to land just after your fixed period ends and before the next one begins.
How overpayments reduce your mortgage term
Each overpayment reduces your outstanding balance. Next month, interest is charged on a lower balance, so slightly more of your contracted repayment also goes to principal. This compounds: each overpayment accelerates all future principal reduction.
The term reduction is non-linear. Overpaying early in the mortgage saves dramatically more than overpaying late, because there are more remaining months to avoid interest on. A £150/month overpayment on a £200,000 / 5.5% / 25-year mortgage cuts years from the term — the exact figure depends on the remaining balance and rate; the calculator shows it precisely for your numbers.
Lump-sum overpayments: remortgage windfalls
A remortgage (switching to a new lender or deal) is an ideal time to make a lump-sum overpayment — there are no ERCs in the gap between deals, and the new balance at the new rate means every pound of reduction has a fresh amortization impact.
Use the "One-time lump sum" field and set "Apply at month 1" to simulate a lump sum at the start of the period. For a mid-term lump sum (e.g., after a property sale, inheritance, or bonus), set the month accordingly to see the precise remaining-term and interest-saved calculation.
Frequently asked questions
What is a mortgage overpayment?
A mortgage overpayment is any payment above your contractual monthly repayment. It reduces your outstanding balance directly, which lowers the interest charged in all subsequent months and shortens your remaining mortgage term. In the US and Canada, the same concept is called an "extra payment" or "additional principal payment."
Will my lender apply my overpayment to the balance or next month's payment?
This varies by lender. In the UK, most lenders automatically apply overpayments to reduce the outstanding balance. In the US, you may need to specify "apply to principal only" — otherwise your servicer might credit the overpayment as an advance payment toward next month's scheduled repayment, which reduces interest savings significantly. Always confirm with your lender.
Is it better to overpay my mortgage or put the money in savings?
If your mortgage rate is higher than the after-tax interest you earn on savings, overpaying wins mathematically. With UK savings rates at 4–5% and mortgage rates often above 5%, many borrowers are in an overpayment-wins scenario. However, once you overpay, the money is locked in your property. Keeping 3–6 months of expenses as liquid savings first is prudent before committing extra to the mortgage.
How do I check my UK lender's early repayment charge (ERC) allowance?
Your mortgage offer document (the binding offer from your lender) will state the ERC schedule and the annual overpayment allowance (typically 10% of the outstanding balance). You can also call your lender's mortgage servicing line or log into your online account to see the current allowance and how much you have already used in the current year.