Mortgage Overpayment Calculator
What an extra payment saves — as a shorter loan, and as a smaller instalment, which are not the same amount.
Interest saved by shortening
16,370.71
- Months removed from the end
- 51
- Months left to run instead
- 189
- Instalment today
- 1,043.93
- Instalment you would pay
- 1,243.93
- Total paid in early
- 37,800.00
- Interest if nothing changes
- 70,542.60
The two things an overpayment can buy
| Outcome | Instalment | Months left | Interest still to pay | Saved |
|---|---|---|---|---|
| As it stands | 1,043.93 | 240 | 70,542.60 | — |
| Shorter loan | 1,243.93 | 189 | 54,171.89 | 16,370.71 |
Add a one-off payment to see what lowering the instalment instead would do.
An overpayment can do one of two things, and lenders offer both without always explaining that they are different. The loan can end sooner with the instalment unchanged, or the instalment can fall with the end date unchanged.
The first saves considerably more interest. The second frees up money every month. Both are computed here from the same figures, so the choice is made after seeing the two answers rather than before.
How it works
The baseline is the loan as it stands: the balance repaid over the years left at the rate given. Everything is measured against it.
To shorten the term, the one-off payment comes off the balance before the next instalment and the extra is added to every instalment after that. Each month the interest is charged on a smaller balance than it would have been, so the loan runs out of months early. The last instalment is whatever is left rather than a full one.
To lower the instalment, the one-off comes off the balance and the instalment is recomputed over the same remaining term. The interest saved is only the interest the repaid amount would have carried, which is why it is so much smaller.
Any early repayment charge you enter is taken off both savings, because it is what the choice actually costs.
Examples
| Case | Input | Result |
|---|---|---|
| 200 a month on a mortgage with twenty years to run | 180,000 outstanding, 3.5%, 20 years, 200 extra a month | The loan closes 51 months early - more than four years - and saves about 16,370 in interest. |
| The same loan, a 20,000 one-off instead | 180,000 outstanding, 3.5%, 20 years, 20,000 paid in once | Shortening the term saves about 18,180 in interest and ends the loan three years early. Lowering the instalment with the same 20,000 saves about 7,840 and takes 116 off every month. |
Frequently asked questions
Why does shortening the term save so much more?
Because the months removed are the last ones, and the instalment carries on unchanged until they are. Lowering the instalment keeps every month of the loan and only removes the interest on the amount repaid. Same money in, two very different amounts out.
Is overpaying always worth it?
It is a guaranteed return equal to the loan rate, which is a real return and is rarely available risk-free elsewhere. Against that: the money is no longer available if you need it, some contracts charge for repaying early, and an invested alternative might return more. The tool gives the first half of that comparison.
Why is there no option to lower the instalment with a monthly extra?
Because an extra paid every month is itself an instalment. There is nothing left to reduce: the amount leaving the account is exactly what you chose to pay.
Does the early repayment charge come with a rule?
Not here. How it is calculated, whether it is capped and whether it applies at all depend on the contract and on the country, so it is an amount you enter rather than a formula this tool asserts.
Good to know
- Amounts carry no currency: the answer is in whatever you put in.
- Results use double precision floating point arithmetic. That is exact enough to decide with and is not an accounting record.
- The rate is treated as fixed for the whole remaining term. On a variable rate the saving moves with it.
- Whether a lender will accept an overpayment, how often, and in what amounts is a matter for the contract. This computes what happens when one is made, not whether one may be.