Should I overpay my mortgage?
It's a question of whether you save or overpay your mortgage
Mortgage overpayments are commonplace right now as homeowners look to offset the impact of today's higher interest rates. Overpaying your mortgage should be a serious consideration if you have the cash. Many can save £10,000s. Yet rates on many savings accounts are good, so those on older, cheaper mortgages may actually do better in savings. This guide helps you decide what's best for you.
This guide was written by Martin Lewis but is now updated by the MSE Money Team.
Overpaying often beats saving – but not always
Get it right and overpaying your mortgage can be a huge cash boost, because:
You'll eat into the debt you've built up from buying a home, meaning you could be mortgage-free sooner.
You don't pay interest on the amount you overpay.
The money you save on interest often (but not always) beats the returns possible in savings.
The gains can be worth £1,000s, sometimes £10,000s – not to mention the extra years of being mortgage-free. Take it from these homeowners who overpaid their mortgages...
Started making overpayments on my mortgage seven years ago. Saved £18,600 in interest and paid up eight years and three months early. So my ex-mortgage payment can now go towards a fantastic retirement pot.
- Debbie
I've made an extra 13 payments towards my mortgage so far, saving me around £5,000 in interest and reducing my mortgage term by four years.
- Letitia
In the first week of 2025 alone, Santander borrowers made £100 million of mortgage overpayments. Across the whole of 2024, they overpaid by more than £2 billion collectively.
But working out whether to overpay your mortgage requires some consideration.
The first thing to do is check whether you should overpay your mortgage or save the cash elsewhere – a key decision you'll need to make. The simple rule of thumb is:
KEY RULE: If your mortgage rate is around the same, or higher, than your savings rate, then it makes sense to overpay...
That's because when it comes to savings, the reverse isn't automatically true.
A higher savings rate could beat overpaying your mortgage, but it won't always. It will depend on a number of factors, including whether you make a one-off overpayment or plan to make regular overpayments over the longer term, the size of your mortgage debt, how many years you've left to repay the mortgage and whether you pay tax on savings interest.
The best way to establish what's best is to use our Should I overpay my mortgage? calculator. It'll show whether saving or overpaying your mortgage comes out on top.
The rest of this guide tells you more about how to measure and compare the savings, and – if it's likely that overpaying your mortgage wins – it explains how to make an overpayment.
During the financial crisis, our mortgage interest rate dropped so that low we decided to triple our repayments for a year, from £700 a month to £2,100 a month. We hoped this would shave a year off our 23-year mortgage term. But as interest rates kept dropping, we continued overpaying – and cleared our £120,000 mortgage in five years.
- Tony
I started overpaying my mortgage 16 years ago. I've now overpaid enough to clear my mortgage next week – shaving nine years off the mortgage term and saving £1,000s in interest. I would haven't achieved this without Martin's advice, plus my hard work, discipline and dedication.
- Trevski
More mortgage overpayment success stories
How much will I save by overpaying my mortgage?
Overpaying can help you save £1,000s, possibly £10,000s, over the life of a mortgage.
Overpayments don't have to be big bucks. Even a regular monthly overpayment of £20, £50 or £100 can substantially reduce the interest you pay, shorten your mortgage term, and may even overshadow savings interest. This table shows the potential impact:
SAVING/ OVERPAYMENT EACH MONTH | MORTGAGE TERM REDUCTION | TOTAL INTEREST SAVED OVERPAYING A £150K MORTGAGE AT 4.5% (1) | INTEREST IF YOU SAVED THE OVERPAYMENT AT 4% (2) |
|---|---|---|---|
£10 | Six months | £2,470 | £2,006 |
£50 | Two years, six months | £11,180 | £8,282 |
£100 | Four years, six months | £20,010 | £13,357 |
£200 | Seven years, seven months | £33,130 | £18,463 |
£500 | 12 years, 10 months | £54,890 | £21,014 |
£1,000 | 16 years, 10 months | £70,570 | £17,703 |
(1) 25-year mortgages term. (2) Savings are pre-tax and stop when the mortgage is paid off to make comparison fair.
Overpaying can help you save lots of interest because it doesn't just reduce your debt – it gets rid of the interest you would have paid on that bit of borrowing in the future too.
But note this isn't a question of whether overpaying your mortgage beats your current savings. It's a question of whether overpaying beats the highest-paying savings available. Too many people earn pitiful rates when much better savings rates are actually available.
So, if you haven't already, see our Top savings accounts and Top cash ISA guides.
Having said that, overpaying your mortgage may still beat a higher savings rate, especially if you are planning a regular overpayment over a longer period of time. So...
Use our overpayment calc to see what you'd save...
To get an idea of how much overpaying your mortgage could help you save, use our:
Mortgage overpayment calculator
As well as calculating one-off and recurring mortgage overpayments, it can indicate what you'd earn in interest if you put your money in a savings account instead.
Three things you MUST check before overpaying
If you've got this far, we're going to assume you've got spare cash and (after using our calculator) it seems using it to overpay your mortgage beats putting it in savings.
But before you chuck all your savings at your mortgage, it's crucial to first make the following three checks:
Check 1: Do you have other, expensive debts? Clear those first
A crucial rule of debt repayments is: clear the most expensive debts first.
Do so and the interest doesn't build up as quickly, saving you cash and giving you more chance of clearing the outstanding balance on your debts earlier. So, as a rule of thumb:
Clear high-interest credit cards and loans before overpaying your mortgage
There are a few debts you probably shouldn't pay off before you overpay your mortgage:
This specifically refers to official loans from the Student Loans Company.
Example 1: Students who started university in England or Wales between 1998 and 2011, plus Northern Irish & Scottish students starting any time.
For these students, interest is set at the lower of base rate plus one percentage point, or the rate of inflation (RPI), making it a relatively cheap form of long-term debt. It's possible, if inflation is high and interest rates are low, you may have a mortgage that's cheaper than the student loan, but over the long term that's unlikely.
Plus, unless you're earning over a set threshold, you won't have to make monthly student loan repayments anyway. Due to the odd nature of these loans and how they're repaid, you should usually prioritise your mortgage over repaying these.
For more information, see Student loan repayment guide.
Example 2: Students who started university between 2012 and 2022 in England, or since 2012 in Wales.
For these students, interest is charged at the rate of inflation plus 3% while you're studying, then on a sliding scale from RPI to RPI+3% depending on how much you earn. So, for these students, it's possible you'll pay a higher interest rate on your student loan than you will on your mortgage.
However, that doesn't automatically mean you should prioritise repaying your loan over overpaying your mortgage. Whether you should depends on whether you're likely to pay it all back before it's wiped in 30 years' time. Many won't, so if student loan overpayments are just depriving you of extra cash now, then it's not worth it.
For more information, see our Should I pay off my Plan 2 student loan? guide.
Arguably those who are financially savvy, with top credit scores, strict organisation and timekeeping who disloyally shift from 0% credit deal to 0% deal (see our Best balance transfers guide) should also pay their mortgage off before their credit cards, as even with balance transfer fees they're cheaper than most mortgages.
However, only adopt this strategy if you're extremely financially competent.
For anyone who doesn't trust themselves to stay disciplined, it's generally best to clear credit card debts first, even at a short-term 0%.
Student loan debts
Credit card debt at 0%
Check 2: Can you overpay without penalty?
How much you can overpay a mortgage by, penalty-free, depends on the deal you have:
-
If you're on a fixed-rate or discount mortgage deal. Most lenders allow you to overpay by 10% of your outstanding mortgage balance each year without penalty.
-
If you're on a Standard Variable Rate (SVR) or some trackers. You can usually overpay by as much as you want (do check if you're on a tracker). Many SVRs are expensive, so check if you can save by remortgaging as well as by overpaying.
If your lender allows overpayments but you overpay by more than its limit, you'll usually be charged a fee. This is typically between 1% and 5% of the amount overpaid.
An example might help...
You've got a £150,000 mortgage and a five-year fixed rate, and decide to overpay a lump sum two years into the deal. Instead of sticking to your lender's 10% limit (£15,000) that's penalty-free, you overpay by £20,000. This means you'll pay a 3% penalty on the extra £5,000 of overpayment – so £150.
This 'percentage left on loan' rule of thumb is very rough, so always check with your lender.
The reason for such harsh penalties is because lenders want you to stick with them once your mortgage deal ends and because they've budgeted to earn a certain amount of interest from you during the mortgage deal, and overpaying means they'll get less.
Check 3: Do you have a sufficient emergency fund?
It's worthwhile having a cash emergency fund if you are debt-free apart from your mortgage.
That's because when you overpay most mortgages the cash is gone. So if there's an emergency (like a leaking roof or redundancy) and you've overpaid with all spare cash, you could be forced to borrow again. Earlier mortgage overpayments are unlikely to stop lenders charging you for being in arrears if you miss monthly repayments.
So it's always a good idea to keep an emergency fund in a top savings account – three to six months' worth of cash is a good guide. Enough to live on if, say, you lost your job.
This applies even if the calculator shows it's better to overpay your mortgage. It's called 'a premium for liquidity' – sacrificing some interest for easy access to cash when needed.
Mortgages with flexible features (such as offset mortgages or those with a 'borrow-back' facility) allow you to overpay and borrow the money back. So you can overpay the mortgage, then withdraw cash without penalty if you need it again. If you have one of these, there's no problem putting all spare cash in the mortgage.
It can be used like a high-rate savings account as you're effectively saving at your mortgage rate but without paying tax. That said, this is less beneficial as savings accounts pay interest without tax taken off thanks to the Personal Savings Allowance.
This example shows how it can work:
On a £150,000 mortgage with a 25-year term, offsetting £25,000 of savings could mean you repay your mortgage nearly two years early and save £3,350 in interest – while still having access to your savings if needed.
Don't misread this as saying everyone should go for one of these mortgages. The problem is their interest rates are usually higher than standard mortgages', and for many the extra cost of the mortgage debt more than outweighs the gain on savings.
These flexible features are not well publicised so ask your lender if they're an option.
The exception – mortgages with flexible features (like an offset mortgage)
Overpaying can benefit a future remortgage
Overpaying a mortgage doesn't just mean paying interest on a smaller amount of mortgage debt. It also means your loan-to-value (LTV) – the percentage of the property value you've borrowed on the mortgage – falls faster too, meaning when it comes to remortgaging you may be able to get a cheaper deal than if you hadn't overpaid.
That's because the lower your LTV, the cheaper the interest rates you can access.
In truth, you'll need to be close to one of the key LTV thresholds for overpaying to help here. But if you are – or can overpay significantly or over a long period – the savings can be huge.
As a rule of thumb, the main LTV thresholds are:
95% LTV: Above this, you won't be able to remortgage at all.
90%, 85%, 80%, 75% and 60% LTVs: Mortgage deals get cheaper below these thresholds.
This table demonstrates the difference in interest rates at various LTV levels:
TWO-YEAR FIX EXAMPLES | FIVE-YEAR FIX EXAMPLES | |
|---|---|---|
90% | 4.20% | 4.29% |
80% | 4.05% | 4.06% |
75% | 3.79% | 3.92% |
60% | 3.72% | 3.83% |
Remortgage rates for £200,000 property, 25-year term, correct as of December 2025.
How to cut the cost of your mortgage
If you are close to an LTV band, or you're coming to the end of a mortgage deal, it's important to check the market to see if you can find a better deal.
Take a look at our Mortgage best buys tool or see our Cheap mortgage finding guide.
How do I overpay my mortgage?
If you've done all the sums and checks and think overpaying your mortgage is the right decision, then the simplest way to overpay your mortgage is online banking (phone might be a possibility too).
You may need to set up your mortgage account as a new payee to make the overpayment. This is unless your mortgage is with the same bank / lender – in this case, you should be able to simply transfer between accounts.
As you make the overpayment, it's likely your mortgage lender will offer you two options:
to reduce next month's payment by the amount you've overpaid.
to keep payments the same and reduce your mortgage balance.
Watch out for this – get it wrong and your overpayment won't help you out that much.
In this scenario, tell your lender you want overpayments to reduce your mortgage balance.
That's because if your overpayment simply reduces next month's payment, it just means you're paying slightly early and saving a few days' interest (but not much). You'd still repay almost as much as you would by sticking to contractual payments.
But by keeping payments the same and reducing your balance, not only are you closer to being mortgage-free, but you'll materially reduce how much interest you'll pay overall.
Once you've said that future overpayments should reduce your mortgage balance, you can either make overpayments as and when you wish or set up a regular overpayment.
Overpaying regularly versus officially reducing the term
One of the benefits of overpaying your mortgage is that it has the same impact as reducing your mortgage term. In other words, overpaying brings you closer to being mortgage-free.
So, don't worry if your lender says making an overpayment won't officially reduce your mortgage term. Or that you'd need to pass an affordability rest to officially reduce the term.
Rather, simply overpaying will do almost exactly the same job – both mean you pay more each month, pay less interest and clear your mortgage sooner. For most homeowners therefore, it's better to overpay without officially decreasing your mortgage term.
If you officially shorten the term, you'll lock yourself in to higher monthly payments. So if your income goes down, or your interest rate rises, you might struggle to repay. Whereas if you're overpaying, you can choose to stop overpaying – giving you more wiggle room.
In short, overpaying has the same practical effect, but with that extra flexibility.
Read Martin Lewis's blog on overpaying your mortgage versus shortening the term.
Lender recalculated your monthly repayments?
A few lenders recalculate your monthly payment each year. As a result, if you've made any overpayments in the 12 months prior, your new monthly payment is likely to be less, so that your final payment remains as close to the end of your official mortgage term as possible.
While this might mean more disposable income in the short-term, it reduces the long-term benefit of overpaying – you won't save as much interest or clear your mortgage as quickly.
So if your lender recalculates your monthly payment downwards at any point, consider increasing your regular overpayment to compensate for this reduction (provided it doesn't exceed the amount your lender allows you to overpay).
Quick question:
Not usually, as most mortgages calculate interest daily, meaning that whatever day you overpay, your interest the next month is calculated on your new, lower balance.
But if you've got a much older mortgage (15+ years), it's possible your interest may be calculated monthly, quarterly or annually instead. If you're unsure, it's best to check with your lender.
The less frequent their calculations, the more important it is to plan the timing of your overpayments. With monthly and annual calculations, it's particularly crucial because:
Mortgage overpayments will only count AFTER the calculation's made. Put it in at the wrong time and you'll miss out...
An extreme example should help to simplify this:
| DONE WRONGLY | DONE RIGHT |
|---|---|---|
Mortgage type | Annually calculated | Annually calculated |
Mortgage rate | 5% interest | 5% interest |
Calculation date | 2 May | 2 May |
Amount overpaid | £10,000 | £10,000 |
Overpayment date | 3 May | 1 May |
Interest reduction over year | Nothing | £500 |
In this example, if you missed the annual date you're better off putting the money in a top cash ISA or easy-access savings account so you're earning interest. Then use it to make a mortgage overpayment a few days before the calculation is made.
If you've got a substantial lump sum to overpay, ask the lender if it will automatically make a calculation, even if it's not the calculation date. Many will do this for you, though you may need to overpay a minimum of about £500 to £1,000.
The above all applies to interest-only mortgages too – if you make overpayments, lenders should apply these to the outstanding debt, and cut your monthly interest payments from the next calculation date. If your overpayment significantly dents the debt, it may make moving on to a repayment mortgage an affordable option.
Does it matter when I make overpayment(s)?
FAQs: Overpaying a mortgage
Yes, you can usually overpay an offset mortgage. But think carefully before doing this as you're already sort-of overpaying with your offset...
An offset mortgage keeps your mortgage debt and savings in separate pots with the same bank or building society. Your cash savings are then used to reduce – or 'offset' – the amount of mortgage interest you're charged. So on a £150,000 mortgage with savings of £15,000, you only pay interest on £135,000 of mortgage debt.
The big difference is that for most mortgages, including offsets, if you overpay that money is gone forever. You can't get it back if you become short of cash.
But with an offset, there's the option of increasing what's in your savings account with any spare cash you've got and further offsetting your mortgage – with the bonus the savings remain yours and can be withdrawn at any time.
So, think carefully before turning offsetting into overpaying.
Investing involves putting money in a financial product in the hope your money will grow more quickly but with the risk it could also lose value.
While it can be tough to find a savings account that beats overpaying a mortgage, the same isn't true with investing. A top-performing investment will pay substantially more than 10% a year, yet one that performs badly can lose serious amounts of money too...
There's no right or wrong answer when it comes to investing, only how to invest the cheapest way (see our Share dealing need-to-knows and Stocks & shares ISAs guides). If you need investing advice, speak to a financial adviser.
Investing isn't wrong. It can be very profitable, but you must know the risks.
And be mindful that to generate the amount of investment returns equivalent to paying off your mortgage, you'd likely need quite high-risk investments.
Listen to Martin Lewis's podcast on a beginner's guide to investing.
Overpaying a mortgage may help to improve your perceived 'creditworthiness'.
So if you're looking to increase your chances of getting credit by bolstering your credit history, overpaying a mortgage could help here – though there's no guarantee it will as there's no universal approach across lenders and firms.
When it comes to the UK's three credit reference agencies, overpaying a mortgage is factored into the credit 'score' that Experian gives you, but not into the scores provided by Equifax or TransUnion.
Even if you're not sure whether overpaying a mortgage is boosting your creditworthiness, it could still improve your chances of getting credit in other ways. For example, your perceived 'affordability' should improve as a result of overpaying, as your total outstanding debt will be reducing more quickly.
Ultimately, overpaying a mortgage shouldn't do any harm to your future chances of getting credit.
Can you overpay an offset mortgage?
Is it better to invest than save?
Will overpaying a mortgage boost my credit score?
We've got lots of other helpful guides and tools, including:
Remortgage guide. Free PDF guide.
Cheap mortgage finding. How to find the top deal for you.
Mortgage Best Buys. Find your top mortgage deals.
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