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Can I make extra mortgage payments?

  • Having a mortgage is a big commitment, so you may want to repay it as soon as possible.
  • With various overpayment options available, there is bound to be a solution for you.
  • At BlueWing Financials, we can help you understand your options and choose the most suitable one.
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Mortgage overpayment calculator

Mortgage overpayment calculator overview

You may be wondering how overpayments could affect your mortgage, so our mortgage overpayment calculator gives you a few options.

In general, overpayments reduce your mortgage balance faster, so you will pay back the mortgage sooner. Normally this means that your monthly payments don’t change, but the mortgage term is reducing.

Alternatively, you may opt to keep the mortgage term unchanged. In this case, your overpayments will reduce your mortgage balance and your monthly payments. Check your mortgage details or contact your lender to see which option is the default setting and to change it, if preferred.

Reduce mortgage term Reduce monthly mortgage payment

Mortgage balance graph

You could reduce your mortgage term by 0 years 0 months

By opting to keep your monthly payment of 0 the same, your mortgage term will reduce by 0. This is due to the overpayments reducing your mortgage balance faster than the original schedule.

You could save 0 in mortgage interest

Reducing your mortgage term will reduce the total amount of mortgage interest you pay by 0. There are two factors that contribute to this saving. First, the lender reduces your mortgage balance by your monthly mortgage overpayments. Second, since your monthly payments stay the same, you are in effect making extra monthly overpayments that further reduce your mortgage balance.

You could reduce your mortgage balance by 0

At the end of your mortgage term, your mortgage balance will be 0. With your mortgage overpayments on an interest-only mortgage, you have reduced your balance by 0.

Mortgage payments graph

Mortgage payments graph explained

Actual mortgage payment

This is the total mortgage payment amount you make a month. It includes the contractual mortgage amount plus any overpayments you make.

Contractual mortgage payment

Based on the mortgage terms entered, this would be the monthly mortgage payment due to the lender.

Potential mortgage payment

This is the amount you could potentially reduce your monthly mortgage payment to if the lender allows it. Under this scenario, your mortgage term of 0 is not reduced.

Regular overpayments

You may make regular overpayments by paying more than the agreed monthly payments. It offers you the flexibility to stop the overpayments any time or to change the amount you overpay by. However, when you no longer overpay, you will still be liable for the contractual mortgage payments.

Regular overpayments can quickly start saving you money, as the interest payable on the mortgage balance reduces from the next payment.

One-off overpayments

If you find that you have some extra cash that you would like to use to reduce your mortgage balance, you could make a one-off overpayment. For example, if you receive an annual bonus or inheritance.

If this is a big lump sum payment, check that you are not exceeding your annual overpayment allowance.

Overpayment allowance

Most mortgage deals allow a certain amount of overpayment per year without a penalty. It is typically 10% of the mortgage balance per calendar year, but check your mortgage offer for the details. Your actual allowance may be different and it may apply per year starting on your completion date.

Early repayment charge (ERC)

If you overpay by more than the allowance, then you will be liable to pay a penalty, which is called the early repayment charge (ERC). This penalty may be a percentage of the entire overpayment amount or just applied to the portion that is above the overpayment allowance.

You should be able to find the details of the overpayment allowance and the early repayment charge on your mortgage deal illustration, your mortgage offer or on the annual mortgage statement.

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How can we help you?

This calculator is for guidance only, as it assumes that your interest rate remains the same throughout the mortgage term. However, as your interest rate or personal circumstances change, it is a good idea to check your mortgage options. Contact our advisers, who will be happy to review your situation and help you with the most suitable option.

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