Our guide to making overpayments

As a general rule, mortgage lenders tend to set overpayment limits:

• If you’re currently on Standard Variable Rate (SVR), you can usually overpay by any amount you want without incurring a financial penalty
• If you’re currently on a fixed rate, you can usually overpay by up to 10% of your balance per year without incurring a financial penalty
• If you’re currently on another type of rate (like a discounted, tracker or variable rate for example), the amount you can overpay before incurring a financial penalty will vary from lender to lender

The definition of ‘per year’ can also vary from lender to lender - some refresh their limits every calendar year (the 1st of January to the 31st of December), but some lenders base this on the month your mortgage started with them originally.

If we switched you onto your current rate, we’ll be able to accurately confirm your set limit. But if we didn’t (i.e. you used a different mortgage broker or you arranged it directly with your lender), this is definitely something you need to find out for your own peace of mind.

At the other end of the scale, some lenders may insist on a minimum overpayment amount - usually to reduce their administration costs. If this is the case, a simple workaround is to build up the minimum amount over a number of weeks/months (and then make the overpayment).

Setting up overpayments

Contrary to popular belief, the process of making overpayments is pretty straightforward.

The three most common methods are:

• Direct bank transfer
• Online payment
• Over the phone

Lots of homeowners tend to choose a direct bank transfer because it’s very similar to transferring money between regular bank (or savings) accounts.

For example, the payment could be set up in the following way:

• Sort code: 01-02-03
• Account number: 12345678
• Reference: Your mortgage account number

When making your very first overpayment, please bear in mind that if you want to accelerate to mortgage freedom, your lender needs to know that you want your overpayments to reduce the term of your mortgage - not your future monthly payments.

You usually only have to do this once (you don’t have to call them every single time you make an overpayment), but it’s hugely important.

A short phone call to your lender to ensure your overpayments are set up correctly could potentially take years off your overall term.

Tracking your balance

Once you’ve made an overpayment, just let us know by updating the amount in your settings:

My account > Settings > Payments > Monthly Overpayment (edit)

By taking a few seconds to do this, we’ll be able to:

• Show you the impact your monthly overpayments are making to your balance each month
• Provide a projection of (a) how much interest you’re on track to save, and (b) how many additional years and months of mortgage freedom you’re on track to gain

You don’t need to log your contractual monthly payments (we’ll do that automatically), but please remember that the more precise and timely information you give us, the better we can track your balance and help you accelerate to mortgage freedom.