See how overpayments can reduce your term and save on interest
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Most UK mortgages allow overpayments of up to 10% of the outstanding balance per year without penalty. Check your mortgage terms for your specific overpayment limit. Some lenders allow unlimited overpayments on variable rates.
Yes, mortgage overpayments reduce your outstanding balance, which means you pay less interest over the life of the mortgage. Even small regular overpayments can save thousands of pounds and cut years off your mortgage term.
It depends on your mortgage rate vs savings rates. If your mortgage rate is higher than savings rates (common), overpaying saves more money. However, keep an emergency fund before overpaying, as you can't easily access money paid into your mortgage.
If you overpay beyond your lender's allowance (typically 10% per year), you may face early repayment charges (ERCs). These are usually 1-5% of the overpayment amount and are common on fixed-rate deals during the initial term.
Typically, overpayments reduce your mortgage term rather than monthly payment. However, you can usually ask your lender to recalculate payments when you remortgage. Some offset mortgages allow flexible overpayments that can reduce monthly payments.