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.
Mortgage balance graph
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.
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.
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.
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.