Question 1

Can I pay off my loan or mortgage early?

Accepted Answer

Most loans and mortgages allow early repayment, but many come with early repayment charges (ERCs), especially during a fixed-rate period. These charges are typically 1-5% of the outstanding balance. Once your fixed-rate period ends, you can usually overpay or settle the mortgage without penalty. Making overpayments — even small ones — can significantly reduce the total interest you pay and shorten your loan term. Check your lender's terms for specific overpayment limits.

Question 2

What is remortgaging and when should I consider it?

Accepted Answer

Remortgaging means switching your existing mortgage to a new deal, either with your current lender or a different one. You should consider it when your fixed-rate period ends (as you will move to your lender's standard variable rate, which is usually higher), when interest rates have dropped significantly, when your property has increased in value (giving you a lower LTV), or when you want to release equity for home improvements.

Question 3

How much can I save by overpaying my mortgage?

Accepted Answer

Even small regular overpayments can save you thousands of pounds in interest and cut years off your mortgage term. For example, overpaying £200 per month on a £200,000 mortgage at 4.5% over 25 years could save over £30,000 in interest and pay off the loan several years early. You can also make a one-off lump sum payment for an immediate reduction in your outstanding balance. Most lenders allow overpayments of up to 10% of the outstanding balance per year without early repayment charges. Use our overpayment calculator to see your exact savings.

Question 4

Is there a limit to how much I can overpay?

Accepted Answer

Most lenders allow you to overpay up to 10% of the outstanding mortgage balance per year without incurring early repayment charges. Some lenders offer more generous limits, and once your fixed-rate period ends, you can typically overpay without restriction. Always check your specific mortgage terms before making large overpayments.

Question 5

Should I overpay my mortgage or save into an ISA?

Accepted Answer

It depends on your interest rates. If your mortgage rate is higher than the after-tax return you could earn on savings, overpaying is generally better because you effectively earn your mortgage rate on every pound overpaid. However, maintaining an emergency fund before overpaying is usually recommended. If your savings rate exceeds your mortgage rate, saving may be more beneficial.

Question 6

What is the difference between reducing the term and reducing the payment?

Accepted Answer

When you overpay, you can choose to keep your monthly payment the same and reduce the remaining term, or keep the same term and reduce your monthly payment. Reducing the term saves more interest overall because you clear the debt faster. Reducing the payment gives you more cash flow flexibility each month. Our calculator shows the term-reduction scenario, which maximises your interest savings.

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