David Lauder from ESPC Mortgages explains how mortgage overpayments work. 

David Lauder, an independent mortgage adviser with ESPC Mortgages explains how overpaying a mortgage works and the benefits.

How does overpaying a mortgage work?

Many people are unaware that almost all mortgages have an overpayment facility available. This includes the most popular types of mortgages which offer fixed/tracker rates during the chosen preferential period.

Most of these will offer an overpayment facility which means that you can pay a lump sum or regular overpayments of typically up to 10% of the capital balance per annum during the chosen preferential rate period without any penalty.

What's the benefit of overpaying a mortgage

The benefit of this is that the balance will reduce and so will the term if the repayments are maintained. This could potentially save thousands of pounds in interest over the whole mortgage term as it is a pure capital payment with no interest accrued to it.

Some providers also offer the choice to reduce the payments in line with the revised balance, helpful for maternity leave or sabbatical breaks in employment.

Offset mortgages

If a 10% overpayment is not enough then there are other options available. Offset mortgages are popular – you can offset existing savings against the mortgage balance, and you will only pay interest on the difference between the two.

No tie-in products

Another option is no tie-in products, which allow you to make unlimited overpayments at any given time without any penalty. However, you should be aware that the rates are likely to be higher for the additional flexibility on the offset and no tie-in options, so the benefits from using these products depends how well you intend to use them.

Is it worth overpaying a mortgage?

To summarise, an overpayment facility is an option that is available on most mortgages but not used enough.

If circumstances allow, it can be a useful tool as the total interest payable could end up being considerably less during the mortgage term, which in turn will mean more money in your pocket – even an increase of £50 per month will provide significant savings over the total term.

ESPC Mortgages

As independent mortgage advisers, ESPC Mortgages can help with all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Give us a call on 0131 253 2920. You can also email the team at fsenquiries@espc.com

Mortgage calculator

Try out the ESPC mortgage calculator to get an idea of what you can afford to borrow and what your monthly repayments will be.

Find the right mortgage for your circumstances using our deals comparison tool.

ESPC magazine

This article appeared in the April 2021 issue of the ESPC magazine. Find out more about the ESPC magazine and read the latest issue online


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The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain. No Individual mortgage advice is given, nor intended to be given in this article.

The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 for first time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.