How much do I save by overpaying my mortgage?
Every amount overpaid stops being charged interest for the rest of the loan, so the saving depends on how much you pay, how early, and what you ask the lender to do with it. With the defaults, a $200,000 balance at 5% with 25 years left has a scheduled payment of $1,169.18 and $150,754 of interest still to come. Overpaying $150 a month changes that as follows:
- Shorter term: the payment stays at $1,169.18, the loan ends after 20 years 1 month instead of 25 years, and interest falls to $116,905, a saving of $33,849.
- Lower payment: the term stays at 25 years, the required payment is recalculated after each overpayment, and interest falls to $134,735, a saving of $16,019.
The headline shows the saving for the mode you pick, and the table under the charts lists the balance and interest with and without overpayments, year by year or month by month.
Should I reduce my term or my monthly payment?
The calculator does not choose for you; it shows the cost of each. Keeping the payment and shortening the term saves more interest, because the whole scheduled payment keeps working against a smaller balance. Keeping the term and lowering the payment frees cash each month but repays the loan more slowly, so interest keeps running on a larger balance for longer.
| Overpayment on $200,000, 5%, 25 years | Shorter term: interest saved | Time saved | Lower payment: interest saved | New required payment |
|---|---|---|---|---|
| $150 every month | $33,849 | 4 years 11 months | $16,019 | Falls each month, from $1,168.30 |
| $10,000 once, in month 12 | $21,370 | 2 years 2 months | $7,191 | $1,109.49 |
In lower-payment mode with a monthly overpayment, the required payment is recalculated every month and keeps falling, to $122.29 by the final month on the defaults, while the $150 overpayment continues. The option that suits depends on your cash flow, other debts and savings, which the calculator cannot see. Your lender sets which options it offers and how often it recalculates the payment.
How is the saving calculated?
The calculator builds two month-by-month schedules from the same balance, rate and term. In each month, interest is the balance times the annual rate divided by 12. The scheduled payment repays principal, the monthly overpayment comes off next, and in the chosen month the lump sum comes off after that. Nothing is ever paid beyond the balance.
The interest saved is simply the interest in the schedule without overpayments minus the interest in the schedule with them. The scheduled payment itself is the level annuity payment, balance x i x (1 + i)^n / ((1 + i)^n - 1), with i the monthly rate and n the months left. In shorter-term mode that payment never changes. In lower-payment mode it is recalculated straight after each overpayment, over the months that remain, so the loan ends on its original date unless the overpayments clear the last of it sooner. Open Show the working under the result to see this run's figures.
Does a lump sum save more early or late?
Earlier saves more, because the money stops interest for longer. On the default balance, a single $10,000 overpayment with the payment kept the same saves:
| Lump sum of $10,000 paid in | Interest saved | Time saved |
|---|---|---|
| Month 12 (after one year) | $21,370 | 2 years 2 months |
| Month 60 (after five years) | $15,948 | 1 year 10 months |
| Month 120 (after ten years) | $10,421 | 1 year 5 months |
In lower-payment mode the same lump sum in month 12 cuts the required payment by $59.69, to $1,109.49, and saves $7,191; paid in month 60 it saves $5,839. Combining both overpayments on the defaults, $150 a month plus $10,000 in month 12, saves $48,731 and ends the loan 6 years 6 months early.
How much does each extra amount a month save?
The saving grows with the overpayment but not in proportion, because larger overpayments end the loan sooner and leave less time for interest to be saved. With the payment kept the same on the default balance:
| Monthly overpayment | Interest saved | Loan ends early by | Total overpaid |
|---|---|---|---|
| $50 | $13,415 | 1 year 11 months | $13,800 |
| $100 | $24,505 | 3 years 6 months | $25,700 |
| $150 | $33,849 | 4 years 11 months | $36,000 |
| $300 | $54,833 | 8 years 2 months | $60,300 |
| $600 | $79,795 | 12 years 2 months | $91,800 |
Every dollar overpaid saves interest at the loan's own rate for as long as it would otherwise have been owed. The chart above runs the same comparison around the overpayment you enter.
Worked examples in pounds and euros
Pounds. A £180,000 balance at 4.5% with 20 years left has a payment of £1,138.77. Overpaying £200 a month and keeping the payment saves £22,370 of interest and ends the mortgage 4 years 4 months early; keeping the term instead saves £11,907. A single £15,000 in month 24 saves £16,988 and 2 years 4 months with the payment kept, or £6,913 if the payment is lowered to £1,037.32.
Euros. A €300,000 balance at 4% with 25 years left has a payment of €1,583.51. Overpaying €250 a month saves €40,701 and 5 years 3 months with the payment kept, or €20,861 with the term kept. The calculator formats amounts for the currency you choose and does not convert them.
Are there limits on mortgage overpayments?
Often, yes, and they are set by your own loan agreement. Some lenders cap penalty-free overpayments, often as a percentage of the balance each year, and charge a fee on anything above the cap. In the UK such a fee is called an early repayment charge; in the US, a prepayment penalty. The figures vary by lender and product, so read the terms rather than relying on a typical number.
To help with that check, the result shows how much you would overpay in the first 12 months and what share of the starting balance that is: $1,800, or 0.9%, on the defaults, or $11,800 and 5.9% if a $10,000 lump sum in month 12 is added. Compare that share with the allowance in your agreement. An agreement may also say whether an overpayment shortens the term or lowers the payment, the two cases the tabs model.
How do you work out an overpayment in Excel?
For a regular overpayment with the payment kept the same, Excel's NPER function gives the number of payments left. Microsoft documents it as NPER(rate, pmt, pv, [fv], [type]), where pmt is the payment each period and cannot change over the life of the annuity. Add the overpayment to the scheduled payment: =NPER(5%/12, -(1169.18+150), 200000) returns 240.23, which means 240 full payments and a smaller 241st. That matches the calculator's 20 years 1 month.
NPER cannot handle a lump sum in a later month or a payment that is recalculated, because both break the equal-payment assumption. For those, build a month-by-month table, or use the schedule under the calculator, which lists the balance with and without overpayments side by side.
What this calculator leaves out
- Fees and penalties for overpaying above any allowance.
- Rate changes. It uses one rate for the rest of the term; a fixed period ending or a variable rate changes the result.
- Timing within the month. Overpayments are applied straight after each scheduled payment, and interest is charged monthly at the rate divided by 12. Lenders that charge daily interest, or apply overpayments on a different day, will differ slightly.
- What else the money could do. Paying down other debts at a higher rate, or keeping savings for emergencies, are separate decisions the calculator does not weigh.
For the full schedule of the loan as it stands today, with the crossover point and repayment milestones, see the amortization calculator.
Glossary
Overpayment: any amount paid above the scheduled payment, which goes straight to the balance. Lump sum: a single overpayment. Recast: recalculating the payment over the remaining term after the balance falls; in the UK, reducing the monthly payment. Early repayment charge: a UK fee for repaying more than a set amount early. Prepayment penalty: the US equivalent. Penalty-free allowance: how much a loan agreement lets you overpay each year without a charge. Balance: what is still owed. Term: the months left until the loan is repaid.
Frequently asked questions
How much will I save by paying $150 extra a month on my mortgage?
On a $200,000 balance at 5% with 25 years left, $150 a month with the payment kept the same saves $33,849 of interest and ends the loan 4 years 11 months early. If the term is kept and the payment lowered instead, the saving is $16,019.
Is it better to reduce the term or the payment when overpaying?
Reducing the term saves more interest, because the full payment keeps working against a smaller balance. Reducing the payment frees cash every month. The calculator shows the cost of each so you can weigh them.
Does a lump sum save more than monthly overpayments?
It depends on the amounts and the timing. On the defaults, $10,000 in month 12 saves $21,370, while $150 a month, $36,000 in all, saves $33,849. Per dollar, the early lump sum saves more because it is paid sooner.
When does an overpayment save the most?
In arithmetic terms, the earlier the better: $10,000 on the default loan saves $21,370 after one year, $15,948 after five and $10,421 after ten. Your loan terms and other finances matter as much as the timing.
Can I overpay my mortgage without a penalty?
That depends on your loan agreement. Some lenders cap penalty-free overpayments, often as a share of the balance each year, and charge a fee above it. The result shows your overpayment in the first 12 months as a share of the balance to compare.
How is the interest saved calculated?
The calculator builds the schedule with and without overpayments and subtracts the total interest of one from the other. Interest each month is the balance times the annual rate divided by 12.
Why does the lower-payment option save less?
Because the recalculated payment repays principal more slowly, so the balance stays higher for longer and keeps attracting interest. The end date stays put, so little or no time is saved.
Can I calculate mortgage overpayments in Excel?
For a fixed monthly overpayment, =NPER(rate/12, -(payment + overpayment), balance) gives the payments left. For a lump sum or a recalculated payment, a month-by-month table is needed.
Does this work for UK mortgages in pounds?
Yes. Choose GBP: a £180,000 balance at 4.5% with 20 years left saves £22,370 and 4 years 4 months with £200 a month overpaid. Check your lender's overpayment allowance and early repayment charges.
Does overpaying help at a 0% rate?
It repays the loan sooner but saves no interest, because there is none to save. The headline then shows zero and the time saved still appears in the result.
Courses at NIFM Academy
All NIFM Academy courses
The full NIFM Academy catalogue: ACCA exam preparation and stock market, forex and crypto trading courses.
See what the course coversFree course videos
Free course videos from NIFM Academy that you can watch before choosing a course.
See what the course coversUS, UK and Europe stock market courses
Stock market courses for the US, UK and European markets, from first trades to professional analysis.
See what the course coversSources and review
Last reviewed 14 November 2026 by the NIFM Academy editorial team. Next review by 14 November 2027.
- Overpayment arithmetic, two month-by-month schedules from the same balance; interest = balance x rate / 12; payment kept fixed, or recalculated over the months left after each overpayment; reproduced in the working. Checked 14 November 2026.
- Microsoft Support, NPER function, NPER(rate, pmt, pv, [fv], [type]); pmt is the payment made each period and cannot change over the life of the annuity. Checked 14 November 2026.