Mortgage overpayment questions
Do overpayments reduce the term or the monthly payment?
Lenders treat an overpayment in one of two ways. They can keep the contractual payment the same and shorten the term, or they can recast the loan so the monthly payment falls and the original end date stays put.
What this calculator does
Overpay keeps the standard repayment unchanged. The extra monthly amount, and any lump sum, comes off the balance. Because you are still paying the original instalment plus the extra, the loan reaches zero before the contractual end date. The headline results are interest saved and months knocked off.
That matches the usual goal of an overpayment calculator: finish sooner, not a smaller direct debit. If your lender has already recast the payment, the contractual figure on your statement is the one to enter, and the remaining term is the one they quote.
Why term reduction usually saves more
If the monthly payment drops and the end date stays the same, you still pay less interest than before, because the balance is lower. You save less than you would by holding the payment up, because less money is going in each month afterwards.
Some lenders apply the overpayment to the balance but do not shorten the contractual term unless you ask. The balance falls, the required payment might later be recalculated, and the months-saved figure on this page would then be optimistic. Ask which of the two your account is set to.
A practical check
The offer document or the overpayment screen in your lender’s account usually says whether extra payments reduce the term or the instalment. If it is silent, a message to the lender is enough — it is a setting on the account, not a new application.
You can still use a lump sum to cut the balance and then choose, afterwards, to keep paying the old amount. The calculator’s assumption is that you do keep paying it.
Try the figures in the calculator