Overpayment

What is Overpayment?

Overpayment is a term used in mortgage lending where a borrower makes voluntary repayments at more than the agreed upon monthly amount.

By overpaying on your Capital & Interest Mortgage each month, you could save yourself hundreds or even thousands of pounds. You can also significantly reduce the term you have to pay your mortgage for.

Even the smallest amount of payments can make huge differences in the long run as it can also have an impact in the interest added over the course of the mortgage. However, while overpayments seem like a good idea in theory, it depends entirely on the terms and conditions of an individual policy. Some mortgage polices may not allow you to make overpayments at all, or there may be a certain period from when you can start making overpayments, some penalise you for making overpayments and some policies cap the amount of overpayments you can make.

If you’re unsure of your options, ask your mortgage lender or talk to a good mortgage broker. Before you think about doing this, make sure you obtain confirmation in writing that this will not give rise to an early repayment penalty and that the agreement is flexible in case you cannot overpay one month.


Q: How does it affect my credit file?

A: For the most part, overpaying a mortgage will not be reflected on your credit file, however it may still have an effect on your ability to get credit. If you pay enough extra on your mortgage that it begins to significantly affect your affordability, then you might find some lenders will decline your application if they think it now takes up a large enough portion of income.

Q: What’s the most you can overpay?

A: Depending on your mortgage, there may not be a limit to the amount you can overpay. If you’re still on an introductory rate for your mortgage, there may be a ceiling of how much you can pay off until you are out of this period. After this time has passed that limit may be removed, but fees may apply proportional to the amount you’d like to overpay.

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