Guide to Paying Off Your Mortgage Early

Being in a financial position that affords you to be able to pay off either some or all of your mortgage ahead of schedule can be a massive advantage. Paying off your mortgage early can reduce the total interest you pay and shorten the life of your loan.

But where do you start?

If repayments on your mortgage have cropped up on your radar, you’re probably wondering “can I overpay my mortgage without penalties?” and exactly “How do mortgage overpayments work?”

Understanding the A-Z of early repayments can help you plan your mortgage debt, guiding you with informed decisions that can save you a lot of money in the long run.

In this article, we explore everything you need to know about paying off your mortgage early, from the benefits and drawbacks of overpaying to what happens after your mortgage is fully repaid. Let’s jump in.

How to Pay Off a Mortgage Early?

With the latest research revealing rises in monthly costs – and forecasts suggesting these increases to continue into 2026 – early repayments and overpayments are becoming increasingly popular ways to save money over the long term of a mortgage.

Thankfully, with most mortgage products on the market today, you will have an option to make additional monthly payments, or lump sum payments, towards your mortgage debt in order to reduce your loans overall balance faster. This process is commonly referred to as making overpayments.

With that being said, if you find yourself in a strong financial position, and are thinking about paying off your mortgage, then it’s essential to understand your mortgage agreement and your chosen lender’s policies.

While early repayments – either small repayments or a full mortgage repayment – can be a smart financial move, it’s important to understand the entire process to help avoid any potential early repayment charges or exit fee costs that may apply.

Early Repayment Charges

As the name suggests, an early repayment – or overpayment –  is an extra payment made towards your mortgage that reduces the total outstanding debt.

When you make overpayments, lenders will often have stipulations in place that charge early repayment fees. Typically, lenders will allow you to pay 10% of your outstanding balance each year without incurring a repayment charge.

If you exceed the permitted limit (10%), the lender will apply an early repayment charge. These charges are in place to help protect lenders from losing interest payments they expected to receive on the initial confirmation of your mortgage agreement.

For example:

Imagine you have a £200,000 mortgage with a fixed rate and a 3% early repayment charge if you pay off the mortgage during the fixed term.

Should you decide to clear your mortgage early, this charge could cost you £6,000 (£200,000 x 3%).

Alternatively, you can decide to repay the maximum total of 10% annually to avoid any early repayment charges.

As such, while overpaying can save you interest in the long run, paying off large sums at once can lead to a reduction in those savings.

To fully understand the cost implications in-line with your chosen lender, using a mortgage early repayment calculator can be an incredibly valuable tool. In addition, working with a trusted mortgage broker can help you weigh the savings against any upfront fees, discussing the best strategy moving forward.

How Lenders Apply Early Repayment Charges

It’s important to note that the exact terms and conditions of how and when lenders may apply repayment charges will depend on both the lender and mortgage product.

For instance, some lenders may hold a no-fee repayment policy, meaning that you are not subject to any Early Repayment Charges. However, these policies are extremely rare and usually only held by large and established institutions with extensive mortgage portfolios that can absorb the financial impact of early repayments.

Most commonly, lenders will apply Early Repayment Charges, and the way in which they are structured/will be applied can vary from lender to lender. For example:

• Some lenders prohibit any form of additional repayment during a fixed-rate period without a penalty.
• While on the other hand, some lenders may be more flexible, allowing overpayments of up to a certain limit – usually around 10% of the remaining balance per year – before applying a charge to any excess amount.

It is important to note that the type and amount of the charge can also differ between providers. For example, some lenders will apply a percentage of the outstanding loan, while others may use a fixed fee.

Exit Fees

In addition to early repayment charges, most lenders will set exit fees if you repay a mortgage in full.

These fees can vary, but are usually nominal fees that cover the cost of administration. For example, your lender may charge £100 for exiting the mortgage product.

It is best practice to always review your mortgage offer documents in order to carefully identify any repayment fees or exit fees that may apply.

What Are the Benefits of Paying Off a Mortgage Early?

There are clear financial benefits to paying off a mortgage ahead of schedule. By reducing your total mortgage balance, you will be paying less interest over the lifetime of the loan and may also benefit from a shorter mortgage term.

In short: reaching a mortgage-free financial status faster will free up a lot of finance that was previously being used (or locked away) in order to pay off your debts.

Here we provide an example of the benefits using a mortgage overpayment calculator:

A borrower with a £150,000 mortgage at 3% interest on a 25-year term who overpays by £200 monthly could pay off their mortgage 7 years and 11 months earlier, saving approximately £21,970 in interest.

In turn, this extra money could then be redirected towards savings, investments, or any other financial goals you may have.

Moreover, there are also the emotional ‘peace of mind’ aspects to consider. Becoming mortgage-free provides not only greater financial freedom, but decreases the stress of  managing monthly mortgage payments and living in debt.

The Drawbacks to Paying Off a Mortgage

Although there are lots of benefits to making early repayments, there are also some potential drawbacks that need to be highlighted and considered.

Knowing that mortgage redemption charges or early repayment fees may apply is one thing, but calculating their impact is another.

It is crucial that you take the time to consider all the cost implications, as in some cases, repayment fees or redemption charges can offset interest savings, depending on your specific mortgage product and lender agreement.

Additionally, (and perhaps most importantly) it is essential that you do not stretch your finances beyond your limits in order to make repayments. By using your finances to make repayments, you will inevitably have less savings, affecting your ability to cover any emergency financial commitments or investments elsewhere.

As such, it’s important to balance mortgage overpayments with your overall financial planning, including maintaining an emergency fund and other financial priorities.

When Is the Best Time to Consolidate a Mortgage?

Consolidating a mortgage is to combine multiple debts, such as credit cards or personal loans, into a single mortgage payment. This is often completed through a remortgage process.

Using a mortgage to pay off other debts can sometimes be a great strategy, and the best time to consolidate is usually after your current product term has ended – when no Early Repayment Charges apply.

If you’re currently on your lender’s Standard Variable Rate (SVR), then this can be an ideal time to consolidate, as you’re not typically locked into any penalties. However, if you’re still within a fixed or discounted product term, it’s important to speak with a trusted mortgage broker to assess your options.

There are two key advantages to doing this:

• A broker can calculate the precise cost of consolidating your mortgage, including any potential fees.
• A broker can help you time the new consolidated deal to coincide with the end of your current term. This avoids rolling onto a more expensive SVR and ensures you don’t incur any unnecessary Early Repayment Charges.

Is It Better to Pay Off a Mortgage or Save?

Deciding whether to overpay on a mortgage or save money elsewhere will wholly depend on your financial goals, interest rates, and associated financial obligations.

For example, if your mortgage interest rate is higher than what you could earn through investments, overpaying might make sense.

Conversely, if your mortgage rate is low and you have other financial priorities like saving an emergency fund, saving for retirement, or simply wish to invest the money elsewhere, then saving could be the better option.

It is always best practice to discuss your personal financial goals and circumstances with a trusted mortgage advisers – like Boon Brokers – in order to find the right balance and match for you.

What Happens After I Pay Off My Mortgage?

Once your mortgage is fully repaid, your lender will issue a formal confirmation that the balance has been cleared. They will also cancel any active direct debits related to your monthly payments. This ensures that no further monthly payments will be collected from your account.

In addition, you will receive signed documentation confirming that you now own your property outright. In most cases, this includes the title deeds to the house, though if your property is registered with the Land Registry (as most are today), ownership records will also be updated digitally.

Importantly, it’s best to keep a copy of all final correspondence and ensure your name is listed as the sole legal owner.

While reaching the end of your mortgage is a major financial milestone, it’s important to make sure your property remains insured, particularly with buildings insurance, which remains essential – even when the property is mortgage-free.

Plan Your Overpayments: Speak to a Mortgage Expert

Before making any decisions about paying off your mortgage early, it’s crucial to understand your mortgage terms, product, and potential fees.

Here at Boon Brokers, our dedicated mortgage experts can help you navigate all of your options, tailoring our advice and help to your exact needs.

We offer a comprehensive breakdown of your mortgage options and create a strategy to best achieve your financial goals for the future.

Contact Boon Brokers today and arrange a free consultation – our expert team are waiting to help you optimise your mortgage repayments and achieve your mortgage goals with confidence.