Typical homeowner could save £31,000 in interest – so why don’t experts agree on overpaying your mortgage? | Money News

Mortgage overpayments are an increasingly publicised means of mitigating higher interest rates.

More than a third of homeowners make them, according to a Monzo survey, but a third of those who don’t feel they lack the understanding.

If you’re swimming in cash, it’s a no-brainer, but for the rest of us, a more detailed assessment of our financial circumstances is required.

We’ve gathered some advice from experts to help you make a start.

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What are mortgage overpayments?

As you might have guessed, it means paying more than your standard monthly mortgage payment.

This may be via a top-up each month, a one-off lump sum contribution or a combination of both.

Overpayments reduce your debt and therefore the total amount of interest you pay, as well as the length of time over which you pay it.

Most lenders allow overpayments of up to 10% of the outstanding balance annually without penalties. Many offer a mortgage overpayment calculator to work out how much interest you would pay over the term.

You can make a regular overpayment by adjusting your direct debit or setting up a standing order to your mortgage account number and sort code.

Alternatively, you can make a lump sum payment into your mortgage account under your bank’s “pay and transfer” tab or equivalent.

Depending on your lender, you may need to inform them that you intend to make overpayments and do not wish for your next monthly bill to be reduced.

How to save £31,000

Overpaying £200 a month could save a typical homeowner more than £31,000 and shorten the length of their mortgage by more than seven years.

The average new British mortgage was worth £160,980 in the third quarter of 2025, according to Findr.

A typical term remains 25 years, according to NatWest (but it’s worth noting that, as of 2022, half of first-time buyers agreed to terms longer than 30 years).

Your rate is likely to change over your mortgage period, but if you apply the average two-year fixed rate (4.24% in February, according to Rightmove, a more representative figure than the inflated rates we’re seeing during the Iran war), the average homeowner would pay another £100,377 in interest over the period.

So with standard, minimum monthly payments of £871, that homeowner will pay £261,356.

If they were to make £1,071 payments a month instead, they would pay off their mortgage in 17 years and 11 months, spending £229,945 and saving £31,411.

‘Overpayments kick ass’

“Overpayment kicks the backside out of mortgages,” says Ben Perks, managing director at Orchard Financial Advisers.

“If you can, you should. You could save a bucket load in interest over the life of a mortgage.”

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Overpaying now may also allow you to underpay or take a payment holiday later with some lenders, like Nationwide and Santander, should you need one.

“Nationwide is particularly strong for overpayers – you can overpay 10% of your original loan balance per year – making them a great lender for this strategy,” says David Stirling, independent financial adviser at Mint Wealth.

Changing your mind is easy, he adds.

“Overpayments are usually set up as a standing order, so you are in total control of the amount and regularity, and the lender is not expecting it each month like your regular mortgage payment.”

Easier said than done

Sounds lovely in principle – but not everyone can fork out an extra 20% for their mortgage every month.

So don’t go in blind, warns Nouran Moustafa, independent financial adviser at Roxton Wealth.

“If you drain your liquidity and have no emergency fund, that’s poor planning,” she says.

“And many mortgages have annual limits or early repayment charges you must understand first.”

Most lenders allow up to 10% overpayments per year before applying a charge, says Stirling.

The opportunity cost

If you do have the capital to spare, it’s worth comparing how much you’d save after repayment charges with how your capital might perform otherwise.

“Always compare the benefits of overpaying on your mortgage against putting that income into savings,” says Elliott Culley, director at Switch Mortgage Finance.

“As a general rule, if the interest on the savings account you can get is higher than your interest rate on the mortgage, then the savings will be the better option.”

Investing your money could also offer better returns than the amount you save with overpayments.

“I favour liquidity and investing elsewhere instead of overpaying your mortgage,” says mortgage adviser Steven Greenall, from Protect & Lend.

“Psychologically, it may suit people, but it’s the cheapest debt you can get, so use it to your advantage.”

Philly Ponniah, chartered wealth manager at Philly Financial, says once your cash is in your mortgage, you cannot easily access it and may miss out on investment opportunities: “The key question is whether you would still feel secure if investments fell. If not, lean towards overpayments.”

Investments aren’t the only alternative, adds Richard Davidson, mortgage adviser at onlinemortgageadvisor.co.uk.

“Overpaying versus contributing to a pension, children’s education or investments is a decision where you need to weigh up different rates of return, risks and your individual circumstances, future plans and goals.”