Overpaying your mortgage - what's involved?
Published: 20 November 2025
Overpaying your mortgage – what’s involved?
If you’ve got a mortgage, paying it off and becoming mortgage-free might be your ultimate financial goal.
But what if you could make that dream a reality sooner? That’s where overpaying your mortgage comes in – here, we explain more about what’s involved.
How do mortgage overpayments work?
A mortgage overpayment is an extra payment on top of your standard monthly mortgage payment. It could either be a lump sum or as regular additional payments.
Making overpayments on a repayment or capital and interest mortgage:
• Reduces your mortgage balance - every time you overpay, you’re paying off more of the capital you owe
• Reduces the amount of interest - with a lower mortgage balance, the amount of interest you owe goes down too
• Reduces the mortgage term - regular overpayments could help you become mortgage-free earlier if you maintain your normal monthly payment as well as your overpayment
But there are some things to bear in mind. With some mortgages, there are limits to how much you can overpay by each year without being charged an Early Repayment Charge (ERC). A fee may also apply when you pay off your mortgage. So it’s worth checking with your lender to find out more.
If you have a mortgage with us, you can find out how to make overpayments on our website or by calling 03300 081 604.
Should you overpay your mortgage?
Whether or not to make mortgage payments may not be straightforward. There’s lots to think about – it all depends on your circumstances.
Should you save instead?
Depending on the interest rates at the time, it may work out better for you to put any spare cash you have into savings instead of making mortgage overpayments. You need to do the sums – and possibly get independent financial advice – to see what would be better for you.
What other debts do you have?
If you have more expensive debts other than a mortgage (for example, a loan with a high interest rate), then you may decide to pay those off before overpaying your mortgage.
Are you saving into a pension?
If you pay into a personal pension from your earnings, your contribution is boosted by the government with tax relief. You’ll either get the tax relief automatically, or you’ll have to claim it yourself. So it’s something else to think about as an alternative to overpaying your mortgage.
How much can you overpay on a mortgage?
It all depends on the type of mortgage deal you have – so check your mortgage offer or speak to your lender.
Early Repayment Charge
Within the initial deal period, usually with a fixed rate mortgage, you can normally overpay your mortgage by up to 10% of the balance every year without a charge, you should check with your lender. So if you have a £200,000 mortgage, a 10% overpayment in the first year of the mortgage would be £20,000.
If you overpay by more than the limit in that year, you may be charged a percentage of the amount you’ve overpaid. This is called an early repayment charge and will vary between lenders.
And if overpayments lead to you paying off your mortgage entirely, then as well as an early repayment charge a Mortgage exit fee may also apply. These charges and fees can add up, so check with your lender.
Standard Variable Rate (SVR)
If you have an SVR mortgage, you can usually make unlimited overpayments without having to pay an ERC. The same usually applies to tracker mortgages, but it’s worth checking with your lender to make sure.
Remember, if you pay the whole mortgage off you may still also have to pay a mortgage exit fee.
Is it better to overpay a mortgage monthly or with a lump sum?
There are pros and cons to both choices – it depends on what’s right for you.
Lump sum overpayments
Making a single lump sum payment could reduce the balance of the mortgage by a lot, saving you interest over the term of the mortgage and helping you to pay it off sooner. Having a smaller loan-to-value (LVT) also means you may be able to get access to better rates if you decide to remortgage.
But, on the other hand, you might have to pay ERCs if your lump sum means you overpay by more than you’re allowed to. And the money would be locked into your property, rather than having easy access to it if you need it unexpectedly later on.
Please note, your monthly payment amount may also change as a result of a lump sum overpayment.
Monthly overpayments
Making monthly overpayments is flexible because you can overpay every month, or stop and start when it suits you. You could even overpay by a different amount each month if you choose to.
You’d just have to be aware of any overpayment allowance limits (ERCs) that may apply. And you might end up paying slightly more in interest over the long term compared to making a large lump sum overpayment.
Does overpaying a mortgage reduce your monthly payments?
Some lenders might give you the choice to reduce your agreed monthly payments after making an overpayment.
But, for many people, the idea behind overpaying your mortgage is to reduce the overall mortgage balance (and the interest paid over the long term). This is so they reach the goal of being mortgage free sooner. Reducing your agreed monthly payment after making an overpayment won't help you do that, as making lower payments will mean it will take longer to pay off your mortgage.
Overpaying may mean that if you come to remortgage in the future, you might be able to choose from mortgages with lower interest rates. This is because you'd have a smaller LTV and have more equity in your home. This could mean your monthly payments go down at that point, but it's not guaranteed.
Can you overpay an interest only mortgage?
Yes, most lenders allow you to make overpayments on an interest only mortgage. You could do this through a lump sum or extra monthly payments.
With an interest only mortgage, your monthly payments only pay towards the interest on the loan rather than the loan itself. But any overpayments you make will reduce the outstanding mortgage balance. This means the final payment you need to make to repay the loan is smaller. It also means you will pay less interest over the life of the mortgage.
It's worth checking with your lender if you may have to pay any fees or charges when making overpayments on an interest only mortgage.
So, now you know a little bit more, could making mortgage overpayments be right for you?
This guide is not to be taken as advice. You should look for independent financial or legal advice if needed.
