It’s a common question for homeowners looking to make the most of their money: Should I overpay my mortgage? With interest rates still sitting at elevated levels in 2025, many are exploring the benefits of chipping away at their home loan earlier than planned. But is it always the right move?
We walk you through when overpaying your mortgage makes sense, how much you could save, and what to watch out for before making the leap.
What Does It Mean to Overpay Your Mortgage?
When you overpay your mortgage, you’re paying more than your regular monthly repayment, either as a one-off lump sum or as a regular extra contribution. This additional payment goes straight toward reducing the capital you owe, rather than just covering the interest.
Reducing your mortgage balance sooner means you’ll pay less interest over the life of the loan and could even become mortgage-free years earlier.
Should I Overpay My Mortgage or Save the Money?
The big decision often comes down to whether you’re better off putting spare cash into savings or using it to overpay your mortgage.
The golden rule in 2025:
If your mortgage interest rate is higher than what you can earn from a savings account (after tax), overpaying usually wins.
For example, if your mortgage interest rate is 5%, and your best savings account earns 4.5%, overpaying means you’re essentially saving 5% on that money, more than you’d gain by saving it.
But if you’re on a low fixed-rate mortgage (say 2%) and can earn more from a high-interest savings account, saving might actually come out ahead.
How Much Could You Save by Overpaying?
Even small regular overpayments can make a big difference over time. Here’s a quick example:
| Monthly Overpayment | Years Off Mortgage | Interest Saved (on £150k @5%) |
| £50 | 2.5 years | £13,020 |
| £100 | 4.5 years | £23,200 |
| £200 | 7.5 years | £38,200 |
That’s tens of thousands saved in interest, and it could give you the freedom to redirect that money toward retirement, travel, or other goals sooner.
Should I Overpay My Mortgage? Key Considerations
Before you start sending extra cash to your lender, consider the following:
1. Do You Have High-Interest Debts?
Always pay off more expensive debts first. Credit cards, personal loans, or car finance with high interest rates should take priority over mortgage overpayments.
2. Check for Early Repayment Charges
Most lenders allow up to 10% of your mortgage balance to be overpaid each year without penalty. Go beyond that, and you could face hefty fees, sometimes 1–5% of the excess amount.
Always check your mortgage terms or speak with your lender before making large overpayments.
3. Keep an Emergency Fund
It’s crucial to maintain easy-access savings for emergencies. Aim for 3-6 months of living expenses in case of unexpected costs like job loss or urgent home repairs. Once that’s covered, consider overpaying.
What’s the Best Way to Overpay?
Once you’ve checked the conditions, most lenders will let you overpay via online banking, a standing order, or a one-off payment. Always tell your lender to apply the overpayment to reduce the mortgage balance, not just to reduce your next month’s bill.
Keeping your monthly payments the same and applying overpayments to the balance will shorten your mortgage term and maximise the interest savings.
Overpaying Can Also Improve Your Mortgage Deals
As you pay off more of your mortgage, your loan-to-value (LTV) ratio drops. Lower LTVs open the door to better remortgage deals, sometimes saving you even more money when you switch lenders or deals.
Should I Overpay My Mortgage in 2025?
In many cases, yes. If your mortgage rate is higher than what you can earn in savings, and you’ve got no higher-interest debts and a solid emergency fund, overpaying your mortgage can be a smart financial move.
But the best option depends on your unique situation. Use a mortgage overpayment calculator to compare potential savings, and consider speaking to a mortgage advisor before making big decisions.
