1. What Is Mortgage Overpayment?

Mortgage overpayment refers to paying more than your required monthly mortgage payment. This additional payment reduces your principal balance faster, which in turn reduces the total interest you pay over the life of the loan.

2. How Does Overpayment Save Money?

The savings calculation follows this formula:

Where:

• Total Interest Without Overpayment — The total interest paid if you only make the required monthly payments
• Total Interest With Overpayment — The total interest paid when making additional monthly payments

Explanation: By reducing your principal balance faster, you pay less interest over time because interest is calculated on the remaining balance.

3. Benefits Of Mortgage Overpayment

Details: Overpaying your mortgage can save thousands in interest payments, help you become mortgage-free years earlier, and build equity in your home faster.

4. Using The Calculator

Tips: Enter your mortgage amount in GBP, annual interest rate as a percentage, loan term in years, and your planned monthly overpayment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Are there any penalties for overpaying my mortgage?
A: Some mortgages have overpayment limits or early repayment charges. Always check with your lender before making overpayments.

Q2: How much can I save by overpaying?
A: Savings depend on your mortgage amount, interest rate, term, and overpayment amount. Even small regular overpayments can save significant amounts over time.

Q3: Should I overpay my mortgage or invest the money?
A: This depends on your mortgage interest rate vs. potential investment returns. Generally, if your mortgage rate is higher than expected investment returns, overpaying may be better.

Q4: Can I make lump sum overpayments?
A: Many lenders allow both regular overpayments and lump sum payments, but check your specific mortgage terms for any restrictions.

Q5: Will overpayments reduce my monthly payment?
A: Overpayments typically reduce the loan term rather than the monthly payment amount, unless you specifically request to recast your mortgage.