An extra $200 a month on a $240,000 loan cuts roughly 7 years and saves tens of thousands in interest. No refinance paperwork, no appraisal, no closing costs — just principal paid early, skipping interest on all remaining months. Mortgage overpayment is one of the highest-certainty uses of spare cash (illustrative — always compare against higher-rate debt first), and this guide shows exactly how much different amounts save, plus the UK 10% rule and prepayment traps.
Part of the mortgage calculator guide. Model your extra payments in the overpayment calculator; compare against refinancing in the refinance calculator.
For informational purposes only — not financial advice. Estimates may vary; consult a qualified financial advisor for decisions. See /terms.
The math: what $100, $200, $500 extra buys ($240k/6%/30yr)
| Extra/month | Years saved (approx) | Interest saved (approx) |
|---|---|---|
| +$100 | ~4 years | Tens of thousands |
| +$200 | ~7 years | ~$70,000+ |
| +$500 | ~12 years | ~$130,000+ |
| Biweekly (half-payment every 2 wks) | ~4 years | One extra payment/year effect |
Why it works: early principal skips interest across all 360 months — front-loaded amortization makes year-1 extra dollars the hardest-working money in the loan. See year-by-year mechanics in amortization guide.
Rates and examples as of Sept 2026, illustrative only — not a lender offer. Excludes taxes, insurance, PMI, HOA, fees and ARM resets.
Rules that decide if overpaying is right
- UK 10% rule: most UK lenders allow ~10% of balance penalty-free yearly — check yours before larger overpayments; penalties can erase the gain.
- US prepayment penalties: rare on mainstream fixed loans, common on some subprime/ARM products — read the note, then overpay.
- Emergency fund first: extra principal is illiquid (retrievable only via sale or refinance). Six months' expenses saved beats year-7 payoff math.
- Higher-interest debt first: 20% credit cards and 8% student loans mathematically outrank 6% mortgage extra payments — kill those, then overpay.
- Specify “principal only”: some servicers park extra cash as “next payment” (including interest) unless labeled. Mark every extra payment principal-only and verify the statement.
Lump sums vs monthly: which saves more?
A $6,000 yearly bonus applied once beats $500/month dripped — slightly. Lump money kills principal 11 months earlier on average, skipping nearly a year of interest on that chunk. But dripped monthly wins behaviorally: autopay survives, “I'll prepay at bonus time” often evaporates into vacations. The practical ranking: automated monthly first (the habit), lump bonuses second (the accelerator), windfalls third (tax refunds, RSU vests — straight to principal unless higher-rate debt exists). On the $240k example, $500/month plus one $5,000 yearly lump approaches ~15 years off combined. Model your exact mix in the overpayment calculator — then automate the monthly part this week.
Automate it or lose it (the biweekly trick)
Willpower fails; autopay does not. Splitting the monthly payment in half and paying biweekly creates one extra full payment yearly (26 halves = 13 months) — ~4 years saved with zero budgeting pain. Annual-bonus lump sums work the same way: one $5,000 yearly extra on the example loan saves roughly 3+ years. Set the automation the week the mortgage starts; lifestyle fills every unallocated dollar within months. Refinancing instead? Break-even decides — refinance guide.
Overpay vs invest: the honest comparison
The overpayment debate has a legitimate other side: markets. $500/month extra at 6% mortgage saves a guaranteed ~6% (the avoided interest); the same $500 in index funds might earn ~7–10% long-term — with volatility, taxes and zero guarantees. Framework: above 7% mortgage rates, overpaying usually wins risk-adjusted; below 5%, investing usually wins on expected value (consult your advisor for your tax picture); between 5–7%, split the difference and sleep well. Non-math factors break ties: no debt tolerance (overpay), employer 401(k) match left on the table (invest first — 100% instant return), PMI exit within reach (overpay — the $200/month raise beats both). Anyone promising one answer for everyone is selling something; run both scenarios with your numbers, then pick the one that survives your risk tolerance.
For informational purposes only — not financial advice. Estimates may vary; consult a qualified financial advisor for decisions. See /terms.