Why Don’t People Overpay Their Mortgages?

A Missed Opportunity for Many Homeowners

Overpaying a mortgage can be one of the most effective ways to save money on interest and reduce the total term. It doesn’t take huge lump sums to make a difference either. Even a small monthly overpayment can add up over time. Despite this, many homeowners in Birmingham never get round to doing it.

Why Overpayments Get Overlooked

It usually comes down to a combination of routine and priorities. When people arrange their mortgage, the focus tends to stay on affordability and securing the right deal. Once the mortgage completes, life moves on quickly and it becomes easy to settle into the habit of paying what’s due, without thinking beyond it.

For many, especially if you’re a first time buyer in Birmingham, the idea of overpaying might not even be something you realise is possible. Unless your lender or a mortgage advisor brings it up, it’s unlikely to be at the front of your mind.

Lifestyle and Spending Habits

Another factor is simply that life gets in the way. Once your mortgage is up and running, things like holidays, home upgrades, or unexpected expenses often take priority. Even when there’s room in the budget, there’s always something else competing for your attention. It’s not always about affordability. In many cases, it’s more about awareness and forming the habit.

Different Mortgage Products, Different Rules

Not all mortgages are created equal when it comes to making overpayments. If you’re on a tracker mortgage, your interest rate follows the Bank of England base rate. This often results in more flexibility, with some lenders allowing overpayments without extra fees.

Similarly, a flexible offset mortgage can offer even more control. These allow you to link your savings to your mortgage balance. The more savings you hold in the linked account, the less interest you pay, and you can often overpay freely. These products are particularly useful for those who have variable income or savings they want to put to work.

For homeowners considering refinancing, it’s worth reviewing your current deal. Our remortgage advice in Birmingham can help you understand if switching products might allow for easier or more beneficial overpayments.

Building a Habit with a Standing Order

If you’re looking to start overpaying regularly, the easiest way to make it stick is by setting up a standing order to go out on the same day as your regular mortgage payment. This keeps it consistent and turns a good idea into a habit.

Say your standard payment is £850 on the 1st of the month. Adding a standing order for an extra £50 to go out that same day blends it into your routine, and before long, it becomes just another part of your monthly outgoings. Because it’s a standing order, you remain in full control. If money’s tight one month, you can pause or adjust it easily through your banking app.

Do You Need to Inform Your Lender?

In most cases, you don’t need to tell your lender about additional payments if you’re staying within your annual overpayment allowance. Many lenders set this at around 10% of your remaining balance each year, but the exact figure depends on your mortgage terms. If you go over that limit, you could face charges, so it’s worth double-checking the details before you begin.

When you set up a standing order, make sure your mortgage account number is used as the payment reference. This helps your lender apply it correctly to your balance. While the majority of lenders won’t ask for advance notice on overpayments, some do prefer a heads-up. That’s especially true if your mortgage isn’t designed with flexibility in mind.

If you’re ever unsure about the rules tied to your current deal, speaking with one of our mortgage advisors in Birmingham can give you clarity. We can look into the fine print for you, so you can avoid unwanted fees and get the most out of your mortgage.

Long-Term Gains and Added Flexibility

In some cases, consistently overpaying can even unlock extra flexibility later on. Depending on your lender, you might be allowed to take a payment break or reduce your monthly amount for a short period. This isn’t guaranteed and needs to be arranged properly in advance. Failing to do so could impact your credit, so always check the terms or speak to your lender before making any changes.

Overpaying isn’t essential, but for those who can manage it, the long-term benefits are clear. Reducing the amount of interest you pay and potentially clearing your mortgage early can make a big difference over time.

If you’re unsure whether your mortgage allows overpayments or you’re thinking about adjusting your payments, our mortgage advisors in Birmingham are always on hand to explain your options clearly.

Date Last Edited: May 12, 2025