Mortgage overpayment

[NeedToAskPlease]

Hoping for advice please.

I have already overpaid the maximum l can for 2025 and so any further payments will incur a penalty.

However I'm wondering if incurring a small penalty is worth it to get more paid off.

I have 4 parts to my mortgage. By overpaying £1000 and paying £20 penalty, my options are:

Interest saved: £286.22

Term reduced by: 11mths

Interest saved: 296.37
Term reduced: 8 mths

Interest saved: £247.11
Term reduced: 1yr 6mths

Interest saved: £390.49
Term reduced: 1yr 2mths

What would be best?

Does that mean that you pay a 2% ERC, regardless of which part of the mortgage you overpay? Assuming each part of the mortgage is on a fixed rate, I think we need to know each interest rate and time until that rate expires before we can reach a view

What's the interest rate? Unless it's pretty high, just put the money in a savings account instead.

It will be rare that it's worth paying a penalty to overpay when you can just save the money instead and over pay when the penalty expires.

Part 1. 5.20% fixed till 2/5/2026. 5yrs 4mths left
Interest saved: £286.22
Term reduced by: 11mths

Part 2. 4.69% fixed till 2/6/ 2026. 5yrs 11mths left.
Interest saved: 296.37
Term reduced: 8 mths

Part 3 4.69% fixed till 2/6/2026 5yrs 6mths left
Interest saved: £247.11
Term reduced: 1yr 6mths

Part 4. 4.69% fixed till 2/6/2026. 7yrs 8mths left
Interest saved: £390.49
Term reduced: 1yr 2mths

We overpaid on our mortgage, we were 31 when we paid it off, if you can do it, it’s worth it. Could you look at another mortgage that won’t penalise you for paying it off early? Of course this is the last thing the mortgage companies want you to do.

Why can't you just put the money in savings with a decent interest rate and then pay a lump sum over payment when your next overpayment allowance starts? You may find a savings with a higher interest than your mortgage interest so would make more sense anyway rather than drip feeding overpayments.

You’d be better off saving the money with those rates, then either overpay next year or when you remortgage - if you’re saving with an ISA then you’d just need a savings rate greater than 3.2%, which you should easily find

This.
And when you remortgage change to first direct as you can make unlimited overpayments.

Many thanks everyone

I disagree with the advice here.

If you followed it and put the money in a savings account with 7% interest, on 2/6/26 (16 months time) you would have approx £94 in interest. Plus the original £1000, plus the £20 ERF you would pay, so £1104 to pay off your mortgage then. Total benefit in waiting = £104 (plus the interest you save, which will be lower as you are paying it off later in the term).

However, if you pay off the £1000 off loan 1 now, you save approx £70 in interest in the 16 months, and then of course you have done the figures for total savings over the life of the loan.

There is also the psychological benefit in paying the money off the loan, reducing the term, and actually paying it into the loan and not a savings account where it can become tempting to use it for something else….

For the sake of a difference of £34, I would pay it into loan 1 (the highest interest rate) now.

Alternatively, you don’t say the loan totals, but depending on amounts, I might pick either the smallest loan and throw the money at that, perhaps to see if between this payment and more money I could save, I might be able to pay it off by the time it comes to remortgage, which would again be a psychological win to have 3 loans instead of 4.

Id look at now paying extra contribution into s works pension if you are able to, vac etc have a good tax break - as if you pay extra £100 in you only see £70 less in your take home pay and you can do this for 12 months at a time

then go back to overpaying your mortgage

I wish now instead of saving, id payed more into my pension. I paid off my mortgage in 16 years by overpaying 9back then there weren't the restrictions there are now)

Many thanks for your reply.

I would much rather be paying it off than saving it for the reasons you give.

Wouldn't Part 4 be better though as more interest saved and a greater term reduction?

If you do want to overpay the mortgage then pay the part with the highest rate (that is, Part 1) as this will save you the greatest amount of interest per year.

The figures you provide for the interest saved are for the remaining life of each part of the mortgage. Since Part 4 has the longest term then the appears to be the better option, but this is misleading. Part 1 is the most expensive per year, so you’d want to clear this one the fastest. I then presume in June 2026 you’d look to consolidate the various parts into a single mortgage, at which point it gets a lot simpler.

The only way that part 4 gives the biggest saving, is that the term is longest. Those figures are misleading because they are based on overpaying vs doing nothing with the money and also ignore the penalty for overpayment.

You need to compare the interest rate for the mortgage vs that of savings (including accounting for any tax you pay on savings and also any penalty you pay for overpaying).

But unless you are already using up your cash ISA allowance and personal savings allowance, I would just put the money in an instant access account (ISA or normal) until you can overpay without penalty and you'll get around 5% interest but not pay the 2% penalty, so will beat the saving you make by overpaying.

Mentally allocate any money you put into your account as 'mortgage money' so it isn't frittered away.

I would say the one thay gives you the greatest reduction in term is the one that is the most beneficial. But I do have to say that the term reductions seem rather large for such a small overpayment.

I think it’s an excellent idea to be paying it off, and congratulations on already paying off enough to have reached the 2025 threshold.

I can’t calculate which loan out of 1 or 4 (or any of them) would be best without know the amounts of the loans, but usually paying the higher interest rate loan will save you the most money. However, I suspect that the difference between any of them would be less than £50 pounds. The important thing is to get the money into one of them. Every day you delay, you pay interest you wouldn’t need to (again - a very small amount).

Depending on the amounts involved, I think you should pick the smallest, or the one that expires the soonest, or the highest interest rate, and throw any extra money at it and see it go down. Make it your goal to have that one paid off before the 2/6/26. (Depending on amounts, maybe more by then).

Honestly, pick one and just go for it. The smallest one is usually recommended for psychological reasons, so I would go with that. Goodluck!

Part 1. 5.20% fixed till 2/5/2026.
Loan balance: £6357.79
5yrs 4mths left
Interest saved: £286.22
Term reduced by: 11mths

Part 2. 4.69% fixed till 2/6/ 2026.
Loan Balance: £9058.78
5yrs 11mths left.
Interest saved: 296.37
Term reduced: 8 mths

Part 3 4.69% fixed till 2/6/2026
Loan balance: £3887.38
5yrs 6mths left
Interest saved: £247.11
Term reduced: 1yr 6mths

Part 4. 4.69% fixed till 2/6/2026.
Loan balance: £7208.53
7yrs 8mths left
Interest saved: £390.49
Term reduced: 1yr 2mths