Mortgage Overpayment Calculator

Overpaying is the highest-return, lowest-risk move most borrowers have, and it is badly under-used because the benefit is invisible until you compute it. Every extra unit of currency goes straight against the balance, so it removes all the future interest that balance would have produced.

The effect compounds backwards. Money paid in year one avoids interest for the whole remaining term; the same amount in the final year avoids almost none. That is why small, early overpayments beat large, late ones.

How it is worked out

There is no shortcut formula — the loan is re-run month by month with the larger payment: balance = balance × (1 + i) − (payment + extra), repeated until the balance reaches zero. The number of iterations is the new term.

Worked example

A 250,000 balance at 6.5% with 22 years left has a payment of about 1,782 and roughly 220,500 of interest still to come. Adding 200 a month clears it in 17 years 9 months — more than four years early — and saves about 48,800 in interest for 42,600 of extra payments, most of which is principal you owed anyway.

Reduce the term, not the payment

Most lenders will apply an overpayment by lowering the monthly figure while keeping the term. That feels like a saving and mostly is not. Ask explicitly for the term to be shortened instead — that is where the interest saving in this calculator comes from.

Frequently asked questions