Mortgage Overpayment Calculator: Interest Saved, Time Cut & Section 24 Effect
See how much interest and time an extra monthly amount or a lump sum saves on a UK mortgage, the 10% penalty-free allowance, and — for a buy-to-let — the Section 24 after-tax effect.
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Every pound paid extra to the mortgage stops earning the lender interest for whatever's left of the term. This calculator turns your balance, rate and remaining term into the two numbers that matter — how much interest an extra monthly amount or a one-off lump sum actually saves, and how much sooner the mortgage is gone — then checks that against the 10%-a-year allowance most lenders apply before an early repayment charge (ERC) kicks in. On a buy-to-let mortgage there's a third number worth seeing: paying less interest also means a smaller Section 24 finance-cost credit in future years, so the calculator shows what actually lands in your pocket once that's accounted for.
How the saving is worked out
On a repayment mortgage, the standard monthly payment is held fixed at today's figure; an extra monthly amount goes straight onto the balance on top of that payment, so the same monthly outgoing pays the loan off in fewer months. A lump sum comes off the balance immediately, once, and the standard payment then clears what's left sooner. On an interest-only mortgage there's no scheduled capital repayment to begin with, so an extra monthly amount is treated as a voluntary capital reduction — something most buy-to-let interest-only lenders allow — which lowers the interest due every month after; a lump sum does the same thing once, permanently cutting the monthly interest for whatever's left of the term, without changing the date the rest of the loan is due. Either way, interest saved is the difference between what the loan would have cost with no overpayment and what it costs once the extra payments are run through, month by month, at the rate entered.
The 10%-a-year allowance, and why it isn't universal
MoneyHelper, the government-backed money-guidance service, puts the general rule plainly: “Many lenders will let you overpay up to 10% a year without penalties,” but also warns “you could be charged for paying your mortgage off early or making a monthly payment which goes over your agreed monthly limit.” It is a convention, not a rule that applies to every deal — some lenders set the allowance higher (NatWest's own tools describe 20% on some products), and any charge on the excess depends entirely on your mortgage offer. The check above compares your entered overpayment, annualised, against 10% of the current balance for the first year only; the allowance itself usually recalculates against the (lower) balance each later year, so it can permit slightly less as the mortgage shrinks. Always check your own mortgage terms before overpaying past what feels safe.
Why Section 24 changes the real number for a buy-to-let mortgage
An individual landlord doesn't deduct mortgage interest from rental profit; instead they get a tax credit worth 20% of it (Section 24, ITTOIA s274A — the same rate already verified on this site's Section 24 page). Overpay the mortgage, and the interest bill in every future year falls — which is the whole point — but so does the credit built on that interest, by exactly 20% of whatever was saved. That leaves 80% of the gross interest saved as the real, after-tax benefit — and because the credit is a flat 20% rather than relief at your own rate, that after-tax figure is the same cash amount whether you pay tax at 20% or 40%. The gap shows up in comparison to the pre-April-2020 rules, which let interest be deducted at your own marginal rate: a basic-rate landlord's 20% credit already matches what they'd have had anyway, so nothing extra is lost; a higher-rate landlord would have kept relief worth 40% of the same interest under those old rules, so Section 24 leaves them further behind on exactly the interest an overpayment removes. The calculator shows both the flat after-tax saving and that higher-rate shortfall. These 20%/40% figures are rest-of-UK income-tax rates — Scotland's own bands run from 19% up to 48%, so a Scottish landlord in the higher band or above would have kept more than 40% under the old rules, making their real shortfall bigger than the figure above (the flat 20% credit and the after-tax £ saving stay the same everywhere in the UK).
Comparing overpaying with putting the money in savings
MoneyHelper's own guidance frames this as a straight comparison: overpaying is worth it if you can't “find a savings or investment product that provides a better rate of return than the rate you're being charged on your mortgage.” The calculator grows the same total contributions — monthly-compounded, at the rate entered — over the mortgage's full remaining term, and compares that to the interest actually saved (after the Section 24 credit is given up, on a buy-to-let). The savings figure is shown before any tax on the interest; see the FAQs for when that matters.
Worked example
A £180,000 repayment mortgage at 4.5%, 20 years left, with an extra £150 a month: the standard payment is roughly £1,139 a month. Paying £150 on top of that cuts the term by 41 months (about 3.4 years) and saves roughly £17,880 in interest over the life of the loan — the exact figures for your own numbers appear above once you enter them.
Overpayment allowance convention: MoneyHelper, “Should you pay off your mortgage early?”, read 13 Sep 2026. Section 24 finance-cost credit rate and rest-of-UK income-tax bands: site/taxdata.py, verified 29 Aug 2026 from gov.uk. Personal Savings Allowance (FAQs only): gov.uk, “Tax on savings interest”, 2026/27, read 13 Sep 2026. This is a screening tool built from the standard amortising-loan formula, not a mortgage offer, a redemption statement or a lender's actual overpayment terms. General information, not advice.
Asked constantly
It depends on the balance, the rate, how much extra you pay and how early in the term you start — interest is charged on the outstanding balance, so every pound paid early stops accruing interest for the rest of the term. Enter your own figures above for the exact amount; as a rule, the earlier and larger the overpayment, the more it saves.
Often not, up to a point. MoneyHelper's guidance is that many lenders let you overpay up to 10% of the balance a year without an early repayment charge (ERC), but this varies by lender and deal — some allow more, some less, and the charge on anything above the allowance depends on your mortgage offer. Check your own terms, or ask your lender, before overpaying past what you're confident is free.
A lump sum paid today reduces the balance immediately, so it starts saving interest from day one; a monthly amount builds up gradually but keeps working every month after. For the same total amount paid over a year, a lump sum paid at the start of the year usually saves slightly more interest than the same amount spread across twelve monthly payments, because it comes off the balance sooner.
It reduces the after-tax benefit but doesn't remove it: the interest itself still falls by the full amount, but the 20% finance-cost credit on that interest shrinks too, leaving 80% of the gross saving as the real after-tax number, whatever your tax band, in every UK nation. The mortgage still gets paid off sooner either way. The calculator's basic/higher-rate comparison against the pre-2020 rules uses rest-of-UK bands (20%/40%) — Scotland's own bands run 19-48%, so a Scottish higher-rate landlord's old-rules shortfall would have been bigger than that comparison shows.
Broadly, if your mortgage rate is higher than the after-tax return you'd get on savings, overpaying wins, and vice versa. This calculator compares the two before tax on the savings side; real savings interest above your Personal Savings Allowance — £1,000 a year for a basic-rate taxpayer, £500 for a higher-rate taxpayer in 2026/27 — is taxable, which would lower the real savings figure a little.
Not the contractual end date, unless the overpayments are enough to clear the whole balance before the term is up. What a voluntary capital reduction on an interest-only mortgage always does is lower the interest charged each month afterwards, since interest is calculated on a smaller balance — the full amount originally borrowed is still due on the agreed date unless it's been paid off completely.
Doing this every quarter, not just once?
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Disclosure: we make and sell the Tax Pack — this is our own product, not a paid recommendation. It does not file anything with HMRC and it is not tax advice; filing goes through you, your accountant or software on HMRC’s compatible-software list.
Sources
The primary documents this page is built from. Links checked 5 September 2026.