Free tool · Loan repayment

Loan repayment calculator

See how regular and one-off overpayments shorten your loan and cut the total interest you pay — with a payoff horizon graph that compares no overpayment, your overpayment plan, and a 20% overpayment benchmark side by side.

Loan details

Your loan

Overpayments

Your overpayment plan

One-off lump sums

Bonus, gift, or windfall — add as many as you want and pick the month each one lands.

No overpayment

Monthly payment
£325
Paid off in
5 years
Total paid
£19,523
Total interest
£4,523

Your overpayment

Monthly payment
£325
Paid off in
3y 7m
Total paid
£18,164
Total interest
£3,164
Time saved
1y 5m
Interest saved
£1,359

20% overpayment

Monthly payment
£325
Paid off in
4 years
Total paid
£18,532
Total interest
£3,532
Time saved
1 year
Interest saved
£991

Payoff horizon

Remaining balance year by year, for each scenario.

£0£3,750£7,500£11,250£15,0000y1y2y3y4y5y
  • No overpayment
  • Your overpayment
  • 20% overpayment

How loan repayment works

When you take out a fixed-rate repayment mortgage or personal loan, you agree to pay a set amount each month for a fixed term. Each monthly payment is split between interest (the cost of borrowing) and principal (what you actually owe). Early in the term, most of your payment goes on interest because the balance is largest. Late in the term, most goes on principal because the balance has shrunk.

The standard monthly payment is calculated so that the loan is fully paid off at the end of the term. This calculator uses the exact amortization formula:

M = P × r × (1 + r)n / ((1 + r)n − 1)

where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (term × 12).

Why overpayments save so much interest

Mortgage interest is calculated on the outstanding balance each month. The faster you reduce the balance, the less interest you pay on every future month. An overpayment in year 1 reduces the balance for all 24 remaining years; an overpayment in year 20 only affects the last 5 years.

That's why even modest monthly overpayments compound into large interest savings. £100/month extra on a £200,000 / 5% / 25-year mortgage typically saves around £20,000 in interest and finishes the loan 3 years early — for an extra outlay of about £27,000 spread across the loan, you've effectively earned a guaranteed 5% return on every pound overpaid.

Regular vs one-off overpayments

A regular overpayment is a fixed extra amount paid alongside your standard monthly payment. Works well from steady income — set it once and forget it. The longer it runs, the more it saves.

A one-off lump sum is a single larger payment, often from a bonus, inheritance, or sale of an asset. Lump sums in the first few years of a mortgage produce the largest interest savings because they remove the most interest-bearing principal from the balance.

Both can be combined. The calculator above lets you model regular monthly overpayments plus an optional one-off lump sum at any chosen month in the loan term.

UK overpayment allowances and early repayment charges

Most UK mortgages allow you to overpay up to 10% of the outstanding balance per year without an early repayment charge (ERC). Some lenders allow more (15-20%); some restrict to a fixed cash amount. The 10% allowance is typically calendar-year or anniversary-year based — check which applies to you.

If you exceed the allowance during a fixed-rate deal, the ERC is usually 1-5% of the overpayment amount. After the fixed period ends (typically 2, 3 or 5 years), you can normally overpay without limit. Many borrowers wait until the end of a fixed deal to make large lump-sum overpayments specifically to avoid the ERC.

The calculator does not factor in ERCs. If you're planning a large overpayment inside a fixed deal, deduct the expected ERC from the interest saved to get the true net benefit.

Should I overpay or save the difference?

The rough rule of thumb: compare your mortgage rate to the after-tax return you can earn elsewhere. If your mortgage is at 5% and you can earn 5%+ tax-free in a Cash ISA or LISA, the maths is close. If your mortgage is at 5% and savings only pay 3-4% before tax, overpaying probably wins.

A few exceptions:

  • Emergency fund first. Keep 3-6 months of essential expenses in easy-access savings before overpaying. Liquidity matters.
  • LISA bonus. The 25% government bonus on Lifetime ISA contributions (up to £4,000/year) effectively pays a much higher return than any mortgage rate — for under-40s, the LISA usually wins.
  • Long investment horizon. Over 20+ years, equities have historically averaged 7-9% before tax, beating most mortgage rates. But the certainty of overpaying is a real advantage.
  • Pension matching. Workplace pension contributions with employer matching usually beat mortgage overpayments — it's free money.

How to use this calculator

  • Enter your loan details. Loan amount, interest rate, and term in years. The default scenario is a typical UK first-time buyer mortgage: £200,000 at 5% over 25 years.
  • Try a monthly overpayment. Start with £100/month and see what it does to the payoff date and total interest. Increase step-by-step to find a number that fits your budget.
  • Model a one-off lump sum. Bonus, gift or sale of an asset — enter the amount and which month into the loan you'd pay it. Lump sums in years 1-3 produce the largest interest savings.
  • Compare against 20% overpayment. The green line on the chart shows what would happen if you paid 20% extra on top of your standard monthly payment, every month. It's a useful benchmark even if you can't afford that much — it shows what aggressive repayment looks like.

Loan repayment FAQ

How much will I save by overpaying my mortgage?+

It depends on your loan size, rate and term, but the saving is usually larger than people expect. On a £200,000 mortgage at 5% over 25 years, overpaying just £100 per month shaves around 3 years off the term and saves roughly £20,000 in interest. The earlier in the term you start, the more you save — overpayments in year 1 wipe out interest that would have compounded across the remaining 24 years, while overpayments in year 20 only affect the last 5 years of interest.

Can I overpay my mortgage in the UK without a penalty?+

Most UK mortgages allow you to overpay up to 10% of the outstanding balance per year without an early repayment charge (ERC). Some lenders allow more; some less. If you're on a fixed-rate deal and exceed the allowance, the ERC is typically 1-5% of the overpayment amount. After a fixed period ends and you move to the standard variable rate, you can usually overpay without limit. Always check your specific mortgage offer document for the exact terms.

Should I overpay my mortgage or save the money instead?+

Compare your mortgage rate to the after-tax return on savings. If your mortgage rate is 5% and the best easy-access savings rate is 4.5% before tax, overpaying probably wins. If savings can earn more than your mortgage rate (e.g. inside a Cash ISA or via a Lifetime ISA bonus), saving may win. Other factors matter too: keeping an emergency fund is more important than overpaying, and the certainty of an interest-saved-vs-interest-earned comparison should beat speculative investment returns unless you're investing for the long term.

What's the difference between regular and one-off overpayments?+

A regular overpayment is a fixed extra amount added to your monthly payment — £100/month, every month. A one-off (lump sum) overpayment is a single larger payment — often a bonus, inheritance or sale of an asset. Both reduce the term and the total interest you pay, but they fit different financial patterns. Regular overpayments work well from steady income; lump sums work for irregular windfalls. The calculator lets you combine both.

Does overpaying reduce my monthly payment or shorten the term?+

It depends on what you ask your lender for. By default in the UK, an overpayment shortens the term — you continue paying the same monthly amount but finish the mortgage earlier and pay less total interest. Some lenders will instead recalculate your monthly payment so it drops while the term stays the same. Term-shortening is the better deal financially because you save more interest, but payment-reduction frees up monthly cash flow. Check which approach your lender uses by default.

Is overpaying always better than investing the difference?+

Mathematically, overpaying a 5% mortgage is equivalent to a guaranteed 5% tax-free return — which is hard to beat with cash savings, but easier to beat with long-term stock-market investing (which historically averages 7-9% annually before tax). The trade-off is risk and time horizon. Overpaying is certain; investing isn't. For first-time buyers near the end of their mortgage term, certainty usually wins. For young buyers with 30 years of investing ahead, the long-term equity premium can outweigh the certainty of overpaying.

Does the calculator account for early repayment charges (ERCs)?+

No. The calculator assumes overpayments are made without penalty. If you're inside a fixed-rate deal with an ERC and you exceed the annual overpayment allowance, deduct the ERC from the interest saved to get a more accurate net benefit. For typical 10%-allowance mortgages, monthly overpayments of a few hundred pounds rarely trigger the ERC — but lump sums can.

Is this calculator financial advice?+

No. This calculator is for illustrative and educational purposes only. Real-world mortgages have specific terms, ERCs, variable rates, tax considerations and product-switch implications the calculator doesn't model. Speak to a qualified mortgage adviser before making changes to your repayment strategy.

This calculator is for illustrative purposes only and does not constitute financial or mortgage advice. Real-world mortgages have specific terms, early repayment charges, variable rates and product-switch implications the calculator doesn't model. Speak to a qualified mortgage adviser before making changes to your repayment strategy.