Understanding Overpayments – Small Changes That Make a Big Difference

When you think about paying off your mortgage, it’s easy to focus on the size of your monthly payment or the interest rate you’ve managed to secure. But one of the simplest and most effective ways to save money on your mortgage over time is something many people overlook: making overpayments.

It might not sound exciting, but even a small extra payment can reduce how much interest you pay and shorten the life of your mortgage. It’s one of those quiet, powerful habits that can make a big difference in the long run.

What is an overpayment?

An overpayment is when you pay more than your regular monthly mortgage amount. This can be done as a one-off lump sum or by increasing your monthly payment slightly on a regular basis.

Most lenders will allow you to overpay up to 10% of your outstanding balance each year without any early repayment charges, though this can vary depending on your lender and the type of mortgage you have. It’s always worth checking the details before making any extra payments.

Why it matters

When you make an overpayment, that money goes straight towards reducing your loan balance, not your interest. Because your interest is calculated on what you owe, even a modest overpayment can start saving you money immediately.

For example, if you have a £200,000 mortgage with 20 years left and an interest rate of 5%, paying an extra £100 a month could save you more than £25,000 in interest over the term and cut almost three years off your mortgage. That’s the power of consistency.

Small steps count

You don’t need to make large overpayments for it to be worthwhile. Even small changes, like rounding up your monthly payment or using part of a work bonus, can have a meaningful effect over time.

The key is to treat it as part of your routine. Setting up a small standing order each month or reviewing your budget once or twice a year can help you make overpayments without even noticing the difference.

If your lender allows it, you can also make one-off payments whenever you have spare cash. Just remember to confirm there are no fees before doing so.

Flexibility and peace of mind

Overpayments aren’t just about saving money. They can also give you more control and flexibility later on.

Reducing your mortgage balance early can mean smaller repayments in the future if you ever need to switch to interest-only for a short time or adjust your outgoings during a difficult period. It’s a form of financial resilience as much as it is a money-saving strategy.

If you’re planning to remortgage soon, overpaying before you apply can also help you qualify for better rates. A lower loan-to-value ratio (the amount you borrow compared to the value of your property) often opens up more competitive options.

Let’s see what’s right for you

Before making overpayments, it’s worth having a quick chat so we can look at your current deal, the lender’s rules, and your overall financial goals. Sometimes it’s better to build up an emergency fund first or clear higher-interest debts before focusing on your mortgage.

I can help you run the numbers and see how much of a difference even a small overpayment could make in your situation.

If you’d like to find out how to make your mortgage work harder for you, get in touch and let’s look at the options together.

Barry, The Mortgage Network - Supporting homeowners who want to save money, reduce stress and take control of their mortgage future.

Your home may be repossessed if you do not keep up repayments on your mortgage.