Overpay £100 a month on a £200,000 mortgage at 5% and it is repaid 3 years 6 months sooner with £24,505 less interest. Work out yours, monthly or as a lump sum, against the allowance most deals give.
On a mortgage of £200,000 with 25 years left, at 5%, today’s lowest 2-year fixed rate for a 75% loan from the 11 lenders NewHomeSearch reads.
| Overpay a month | Repaid in | Sooner by | Interest saved |
|---|---|---|---|
| £50 | 23 years 1 month | 1 year 11 months | £13,415 |
| £100 | 21 years 6 months | 3 years 6 months | £24,505 |
| £200 | 18 years 10 months | 6 years 2 months | £41,843 |
| £300 | 16 years 10 months | 8 years 2 months | £54,833 |
| £500 | 13 years 11 months | 11 years 1 month | £73,102 |
Money paid off sooner stops interest sooner. On £200,000 with 25 years left at 5%, £12,000 paid now saves £27,024 of interest and ends the mortgage 2 years 9 months sooner. The same £12,000 at £200 a month over the first 5 years saves £22,735 and ends it 2 years 5 months sooner. Overpaying every month until the mortgage is repaid puts more in and saves more again, as the table above shows; the calculator works out a lump sum and monthly overpayments together.
Most deals let you overpay 10% of the balance a year without a charge. On £200,000 with 25 years left at 5%, that is £1,667 a month: the mortgage ends 18 years sooner, with £113,458 less interest.
To repay a 30-year mortgage in 15 years, overpay the difference between the two payments. On £200,000 at 5%, the 30-year payment is £1,074 a month; £508 a month on top repays it in 15 years.
Of the 306 deals NewHomeSearch reads whose lender states an overpayment allowance, 225 allow 10% of the balance a year without a charge. Overpaying beyond it during a deal costs an early repayment charge on the amount beyond the allowance; the commonest is 2% in year 1 and 1% in year 2 (44 of the 108 2-year fixes here that state their charges). The deal’s own terms decide; the rate comparison shows each deal’s charges.
Overpaying £100 a month on a £200,000 mortgage at 5% with 25 years left repays it 3 years 6 months sooner and saves £24,505 of interest. Each overpayment comes straight off what you owe, so the interest on it stops at once.
The same money saves more paid sooner, because the interest on it stops sooner: on £200,000 at 5% with 25 years left, £12,000 paid now saves £27,024 of interest, while the same £12,000 at £200 a month over 5 years saves £22,735. Monthly overpayments that keep going for longer put more in, and save more in all.
Overpay the difference between the two payments. On £200,000 at 5%, the 30-year payment is £1,074 a month; overpaying £508 a month on top repays it in 15 years. That is £6,096 a year, within the 10% of the balance most deals let you overpay without a charge (£20,000 on £200,000).
Overpaying the full 10% a year on £200,000, £1,667 a month, repays it 18 years sooner and saves £113,458 of interest at 5%. Whether it suits you depends on your savings, other debts and plans; the calculator works out your own figures.
Of the 306 deals NewHomeSearch reads whose lender states an overpayment allowance, 225 allow 10% of the balance a year without a charge. Above it, an early repayment charge applies during the deal on the amount beyond the allowance; the commonest is 2% in year 1 and 1% in year 2 (44 of the 108 2-year fixes here that state their charges). Your own deal’s terms decide.
Not unless you ask: by default the payment stays the same and the mortgage ends sooner, which saves the most interest. Most lenders will work the payment out again on what you owe if you ask, which lowers it instead.
They have already come off what you owe, so the payment at your next rate is worked out on a smaller balance. The mortgage calculator shows the payment after the deal for your own figures.