Mortgage overpayment calculator

A mortgage is a great way to buy commercial or residential property, but with interest accruing over the life of the loan you could end up paying back two or three times what you borrowed. However, making a mortgage overpayment every month or as an irregular lump sum can significantly reduce the amount of interest you pay and shorten the term of the loan. Use our simple mortgage overpayment calculator to find out how much you could save.

Page written by Chris Godfrey. Last reviewed on December 5, 2024. Next review due April 6, 2025.

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This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

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What is mortgage overpayment?

A mortgage overpayment is when you pay more than your required monthly mortgage payment, either as a one-off lump sum or by increasing your regular payments. Overpayments help reduce the outstanding loan balance faster, potentially saving you money on interest and shortening the term of the mortgage.

What is a mortgage overpayment calculator?

A mortgage overpayment calculator is a digital tool to estimate potential mortgage interest savings and by how much you can shorten the term of your mortgage if you pay back more each month.

How do I use a mortgage overpayment calculator?

To use our mortgage overpayment loan calculator, simply input the outstanding loan amount, the time remaining on your mortgage, the current interest rate, and how much extra you’d like to repay per month. The calculator will then generate your results, which will show you your new monthly payment, how much time you’ll shave off your mortgage and the total amount of interest you’ll save over the life of the loan.

Should you overpay your mortgage?

Overpaying on either a residential or commercial mortgage offers significant benefits. As well as reducing total interest costs and shortening the repayment period, overpaying can accelerate equity buildup and increase financial flexibility. Even modest, regular overpayments can yield substantial interest savings over time. However, you should ensure that paying down your mortgage faster does not create cash flow or financial difficulties elsewhere. Only overpay what you can comfortably afford to spend.

How much can you overpay on your mortgage?

Many UK lenders allow overpayments, but there may be limits, often capped at 10% of the loan balance per year. If you go over this cap, you will probably be penalised with an early repayment charge (ERC). Before overpaying, check your lender’s policy and ensure it aligns with your financial goals, such as maintaining an emergency savings fund.

What are the ways to overpay on your mortgage?

There are different ways to overpay on your mortgage, but keep in mind that overpayments are permanent, and you cannot get the money back if you need it for an emergency further down the line. You may also need to contact your lender before you begin to make overpayments to ensure they credit the extra cash properly.

Regular mortgage overpayments

This method involves making an increase to your required monthly mortgage payment. For example, if your mortgage payment is currently £1,500 per month and you increase that to £1,750 per month, you will overpay £250 per month or £3,000 per year. The benefit of this approach is that you have the option to scale back your overpayments if your cash flow becomes strained or you need to meet a sudden financial emergency.

Lump sum overpayments

If you have spare cash to hand, it may be more financially beneficial to pay off some of your mortgage debt than put the cash in a low-yield savings account. Making a lump sum overpayment will reduce your mortgage balance faster than if you make small monthly overpayments over many years. A lower balance will accrue less interest over the remaining term of the loan.

Interest-only mortgages

With an interest-only mortgage, you do not repay any of the principal over the term of the loan. The full sum you initially borrowed must be repaid when the mortgage agreement ends. However, you can still make overpayments against an interest-only mortgage to reduce the overall sum you owe and the interest that you pay, although you’ll likely need to contact your lender to set the overpayment(s) up.

Early Repayment Charges (ERCs)

ERCs are penalties that mortgage lenders apply if you pay back too much of your mortgage debt per year – often, anything over 10% of the outstanding balance may trigger an ERC. Typically, ERCs range from 1% to 5% of the remaining loan, and this percentage tends to decrease each year that you’re into the deal. For example, repaying a £200,000 mortgage in full could cost you £10,000 in ERCs in the first year but only £2,000 by the fifth year.

When is the best time to make overpayments on my mortgage?

There’s no one-size-fits-all answer to this question, as the best time to make mortgage overpayments depends on your mortgage type and personal goals. To save the most on interest, it’s ideal to overpay just before your lender calculates and re-evaluates the interest. Check with your lender to find out when and how often this happens.

If your interest is reviewed daily, the timing of overpayments doesn’t matter—you can do so anytime. However, if interest is calculated monthly or annually, making overpayments just before the review date can maximise savings. Always confirm details with your lender first.

Can I make overpayments against a commercial mortgage?

Yes. Just like a regular home loan, you can pay down your commercial mortgage by regular monthly overpayments or with a one-off lump sum.

What type of commercial mortgage can I get?

If you’re looking to buy, develop or invest in commercial property, there’s more than one way to finance the transaction:

Commercial mortgage: The most common type of business property loan. Use a commercial mortgage to buy or refinance existing business premises.
Development finance: Get a business loan to cover the costs of building new or refurbishing or enlarging an existing commercial property.
Bridging finance: Instead of using valuable working capital, bridging finance is a short-term loan to help you bridge the gap between selling your current business property and buying another.
Commercial investment mortgage: A commercial investment mortgage is a loan designed for buying or refinancing a commercial property for investment purposes – for example, if you want to rent it out to other businesses or individuals.
Semi-commercial mortgage: A semi-commercial mortgage, or mixed-use mortgage, is a loan for purchasing or remortgaging a property that’s considered mixed-use. This means the property combines both residential and commercial usage, such as a retail unit with a residential flat above. You might want to buy this type of property if you’re an investor looking to generate income from residential and commercial tenants.
Owner-occupied commercial mortgage: An owner-occupied commercial mortgage is a type of commercial mortgage that’s used to buy or refinance a property intended to be the applicant’s business premises. This could be a shop, office, warehouse, etc.

How Swoop can help

Interest rates and terms and conditions for commercial property finance and other business loans can vary significantly, so it is important to shop around for the best deal. This is where Swoop can really help. Contact us to discuss your borrowing needs, get help with your application and to compare high-quality business property loans from a choice of lenders. Buy, build, invest, without putting strain on cash flow. Register with Swoop today.