When you have extra money to put on your mortgage, you have choices: reduce term or overpayment. Each has different benefits.
Reduce the Term
Shortening your mortgage term means higher monthly payments but less total interest. You pay off faster. Good if you can comfortably afford higher payments.
- Lower total interest paid
- Higher monthly payments
- Be debt-free sooner
Lump Sum Overpayment
Making occasional overpayments reduces balance but keeps term same. Most lenders allow 10% overpayment annually without penalty. More flexible.
What's better financially?
Term reduction saves more interest overall. But overpayment gives flexibility if your income changes.
- mortgage
- overpayment
- term
- UK