Properties & HomesIndependent UK property researchResearch an area
Mortgages · 8 minute read

Mortgage overpayments and early repayment charges.

Paying extra can cut interest and shorten a mortgage, but only after you understand the product’s allowance, charge period and how the lender applies your payment.

The short answer

An overpayment reduces mortgage capital earlier than scheduled, which usually reduces future interest. An early repayment charge (ERC) is a product-specific fee that may apply when you repay too much, switch or redeem during a stated period. Never assume every mortgage has the same “10% rule”: read your offer or ask the lender for the allowance and calculation basis.

Regular or lump-sum overpayments

You may increase a monthly payment or make a separate lump sum. Confirm that the lender will apply it to capital, whether it reduces the term or future monthly payment, and when interest is recalculated. Keep the confirmation and check the next statement.

Understand the allowance

Products can define an allowance by calendar year, mortgage year or another period, and may calculate it from the original or current balance. Some carry unused allowance forward; many do not. Separate sub-accounts may have separate limits. Ask for the remaining charge-free amount before a large payment.

When an ERC can matter

An ERC can apply to the amount above an allowance or to a larger redemption, depending on the contract. Charges often change during the deal period, but the exact percentage and dates are set by the product. If you are moving home, check whether the mortgage is portable and remember that porting remains subject to underwriting.

Before paying extra

  1. Clear expensive short-term debt where appropriate.
  2. Keep an accessible emergency reserve.
  3. Check pension, savings and tax consequences.
  4. Obtain the exact allowance and ERC in writing.
  5. Confirm how the lender will apply the payment.
  6. Model the saving, but treat future rates as scenarios.

Use the mortgage overpayment calculator to compare interest and term effects. It deliberately does not assume that an entered overpayment is charge-free.

Sources and limitations

See MoneyHelper’s guide to paying a mortgage off early. Allowances, ERCs, interest timing and payment treatment vary by lender and product. This is general information, not personal financial advice.

Reviewed by the Properties & Homes editorial team
Published and last reviewed: 14 August 2026.
Change log: first edition.