How to Model Mortgage Overpayments

Step 01

Understand the fixed-rate model.

The original monthly payment uses the standard fixed-rate repayment formula over the remaining term. The overpayment scenario applies the same payment plus a regular extra amount until the balance reaches zero.

Because the rate is fixed in the model, the comparison isolates the effect of the overpayment rather than rate changes.

Step 02

Worked example: a £150,000 mortgage at 5% over 25 years.

The original monthly payment is about £877. With a £100 monthly overpayment, the balance clears several years earlier and the interest saved is meaningful over the full term.

The exact result depends on the balance, rate and remaining term, so run the calculator with your own figures and compare a couple of overpayment amounts.

Step 03

Check lender overpayment limits.

The calculator models a term-reducing overpayment under a fixed rate. It does not replace the lender's terms.

• Many UK mortgages allow overpayments up to 10% of the outstanding balance each year without penalty.
• Exceeding the limit can trigger early-repayment charges.
• Some lenders reduce the monthly payment instead of shortening the term.
• Fees, rate changes and future borrowing decisions change the real outcome.

Step 04

Compare scenarios before deciding.

Use the worksheet to record the original payment, new payoff time, interest saved and the assumptions for each scenario. Compare a small regular overpayment with a larger one and consider whether the money might be better kept liquid for emergencies.

This guide and calculator are planning aids, not financial advice.