Most people focus on getting the lowest possible interest rate — and that's smart. But there's another strategy that's just as powerful and entirely within your control: making extra payments on your mortgage every month.
The maths is remarkable. On a typical 25-year mortgage, an extra £100–£200 per month can save you tens of thousands of pounds in interest and knock years off your term. Here's exactly how it works.
The Real Numbers: £250,000 Mortgage at 5%
Let's use a concrete example: £250,000 borrowed over 25 years at 5% interest. Standard monthly payment = £1,461.
📊 Detailed Example: £200 Extra Per Month
Why Does This Work So Powerfully?
In the early years of your mortgage, the vast majority of your monthly payment goes toward interest, not reducing the loan balance. For example, in Month 1 of the above mortgage, of your £1,461 payment:
- £1,042 goes to interest (71%)
- £419 goes to principal (29%)
By making extra payments early, you reduce the balance faster, which means the interest portion of future payments shrinks — accelerating your payoff. It's a compounding snowball effect working in your favour.
Strategies for Making Extra Payments
1. Regular Monthly Overpayments
Add a fixed amount every month. Even £50 makes a meaningful difference. Most lenders allow up to 10% of the outstanding balance per year without penalty — check your mortgage terms first.
2. Lump Sum Payments
Received a work bonus, inheritance, or sold something valuable? Put a lump sum directly onto the mortgage. A £5,000 one-off payment early in the term can save £8,000–£12,000 in interest over the full term.
3. Annual Overpayment
If regular extra payments feel tight, make one larger overpayment per year — perhaps from a tax refund or holiday savings. Even once a year adds up significantly.
4. Round Up Your Payments
If your payment is £1,461, pay £1,500 every month. The £39 difference is barely noticeable day-to-day but over 25 years saves several thousand pounds.
Important: Check Early Repayment Charges
Before overpaying, check your mortgage terms. Most fixed-rate deals allow you to overpay up to 10% of the balance per year without penalty. Going over that limit may trigger an Early Repayment Charge (ERC). On a tracker or variable mortgage, you typically have more flexibility.
Overpay vs Invest: Which Is Better?
If your mortgage rate is 5% and investments return 8%, mathematically investing looks better. But mortgages offer a guaranteed, risk-free return equal to your interest rate. For most people, a combination — pay off the mortgage steadily while investing — gives both security and growth.
Calculate Your Own Savings
Enter your mortgage details and an extra monthly payment into our calculator to see exactly how much you could save in interest and how many years early you could be mortgage-free.
Try the Extra Payment Calculator →