How Much Interest Can You Save by Overpaying?
The amount you save depends on your mortgage size, interest rate, remaining term, and overpayment amount. This guide provides real examples to help you understand the potential savings.
Example 1: £200,000 Mortgage at 3.5%
Scenario: £200,000 outstanding balance, 25 years remaining, 3.5% APR
| Overpayment | Time to Repay | Total Interest | Interest Saved | Years Saved |
|---|---|---|---|---|
| No overpayments | 25 years | £100,192 | - | - |
| 5% annually | 19.2 years | £70,438 | £29,754 | 5.8 years |
| 10% annually | 15.1 years | £49,847 | £50,345 | 9.9 years |
Key Insight
Even a 5% annual overpayment (£10,000 per year on a £200,000 mortgage) saves nearly £30,000 in interest and cuts almost 6 years off your mortgage term.
Example 2: £300,000 Mortgage at 4%
Scenario: £300,000 outstanding balance, 20 years remaining, 4% APR
| Overpayment | Time to Repay | Total Interest | Interest Saved | Years Saved |
|---|---|---|---|---|
| No overpayments | 20 years | £127,014 | - | - |
| 5% annually | 15.8 years | £93,179 | £33,835 | 4.2 years |
| 10% annually | 12.7 years | £67,483 | £59,531 | 7.3 years |
Example 3: £150,000 Mortgage at 2.5%
Scenario: £150,000 outstanding balance, 15 years remaining, 2.5% APR
| Overpayment | Time to Repay | Total Interest | Interest Saved | Years Saved |
|---|---|---|---|---|
| No overpayments | 15 years | £29,913 | - | - |
| 5% annually | 12.4 years | £22,906 | £7,007 | 2.6 years |
| 10% annually | 10.2 years | £17,243 | £12,670 | 4.8 years |
Note on Lower Interest Rates
Even at a lower 2.5% interest rate, overpayments still generate meaningful savings. The lower your rate, the less dramatic the savings—but they're still worthwhile, especially for the psychological benefit of being mortgage-free sooner.
Factors That Affect Your Savings
1. Interest Rate
Higher interest rates mean greater savings from overpayments. At 5%, the same overpayment saves more than at 2.5%.
2. Remaining Term
The longer your remaining term, the more interest you'll save. Overpaying early in your mortgage saves the most money.
3. Mortgage Size
Larger mortgages mean larger absolute savings. A 10% overpayment saves more on a £400,000 mortgage than a £100,000 one.
4. Consistency
Regular, sustained overpayments save more than sporadic lump sums, as your balance reduces faster and compounds over time.
The Power of Starting Early
The earlier you overpay, the more you save. Here's why:
Example
£250,000 mortgage at 3.5% over 25 years
- Overpay £5,000 in Year 1: Saves approximately £7,350 in interest
- Overpay £5,000 in Year 10: Saves approximately £4,100 in interest
- Overpay £5,000 in Year 20: Saves approximately £900 in interest
The same £5,000 overpayment saves dramatically more interest when made early in the mortgage term.
Calculate Your Specific Savings
Every mortgage is unique. Use our Mortgage Overpayment Calculator to see exactly how much you could save based on your specific mortgage details.
Key Takeaways
- Even modest overpayments (5%) can save tens of thousands of pounds in interest
- Higher interest rates and longer terms amplify savings
- Starting early maximizes the compound effect of overpayments
- Consistent overpayments are more effective than sporadic lump sums
- Use a calculator to model your specific situation accurately
Is It Worth It?
For most borrowers, the answer is yes—if you have no higher-priority uses for the money (like high-interest debt or insufficient pension contributions).
The examples above show that overpayments deliver:
- Guaranteed returns equal to your mortgage rate
- Substantial interest savings over time
- Years shaved off your mortgage term
- Greater financial freedom sooner
You can read more about whether overpaying is right for you in our guide here.
Ready to See Your Savings?
Calculate exactly how much you could save with overpayments tailored to your mortgage.