How do I calculate my mortgage overpayments?

Making overpayments on your mortgage is a good way to clear your balance quicker and save money that would otherwise go towards paying off interest.

But trying to work out how much you’re saving in interest and how much your balance is going down by can be pretty confusing stuff. Plus, your lender might charge you for overpaying, so things can easily get overwhelming if you try to do the maths yourself.

Use a mortgage overpayment calculator instead

Well, rather than speaking to your mortgage lender or racking your brains with a pen, paper and calculator, there are tools out there specifically designed to help you do the job.

A mortgage overpayment calculator can do the maths for you. You can use our free mortgage overpayment calculator here! 

On it, you can input how much you owe on your mortgage, how long’s left on your current term and the interest you’re paying. Then, you can fill in how much you’re overpaying by – whether that’s a one-off sum or a regular monthly payment.

This will give you a detailed overview of how much you’d save in interest by overpaying, and how much quicker you’ll pay your mortgage off. As a final touch, you can even see a yearly breakdown of your mortgage balance when making overpayments, compared to making none.

Bear in mind that you should take the results from this calculator with a pinch of salt. Many lenders charge you for overpaying by a certain amount, so you’ll need to consider this when looking at the results from the calculator.

Watch out for charges

Although most lenders should allow you to overpay on your mortgage, it’s pretty common to face charges if you overpay by more than is stated in your agreement.

Often, you’ll be set a limit on how much you can overpay by - this could be a percentage of the total amount you borrowed. For example, many lenders allow you to overpay by around 10% of your mortgage balance every year.

Some lenders won’t be this generous, and you may be hit with costly charges if you do overpay more than they allow. This is why it’s really important that you read the terms of your agreement before making an overpayment.

If you don’t check for any penalties your lender might dish out, you risk actually paying more than you would save by overpaying.

This might seem unfair, but the lender may have budgeted to make a certain amount of profit from your interest payments, so any changes to this agreement affect them too.

The best way to ensure your overpayments run hiccup-free is to read the terms and find out just how much you’re allowed to overpay by. Once you’ve done this, input your details into the overpayment calculator – overpaying by no more than you’re allowed to, even if you can afford it – and you’ll have a good idea of the savings you’ll make.