Are There Mortgages with Unlimited Overpayments?

Answered on 20 March 2024 by

Can I get a mortgage with unlimited overpayments? Are there mortgage lenders that allow you to make early repayments with no penalty?

Nicholas Mendes

It's uncommon to find mortgage deals with truly unlimited overpayment options, however many mortgages do offer the flexibility for borrowers to make overpayments without incurring ERCs (early repayment charges) or penalties. Overpayments can help borrowers reduce their mortgage balance faster, potentially saving on interest payments and shortening the loan term.

Lenders typically impose certain limits on overpayments, for example you can only overpay up to a percentage of the outstanding mortgage balance or a specified amount within a given time period - e.g. each calendar year. These limits vary among lenders and mortgage products.

Mortgages with Unlimited Overpayments

The only time you’d typically be on a mortgage that allows truly unlimited overpayments is when you go on to your lender’s SVR (standard variable rate) after your fixed or tracker deal ends. It’s unadvisable to stay on a lender’s SVR even for a short period as they’re often much more expensive than other products on the market.

It could technically be possible to make an unlimited overpayment when you go on to your lender’s SVR before you tie into a new deal. But, in this situation, you would want go on to your new mortgage deal fairly immediately.

For example:

  • Your fixed rate expires on the 15th of the month
  • You make the overpayment on the 16th
  • You tie into a new deal on the 17th

This way, you avoid ERCs on the 15th, can make any overpayments you need, then can go on to a new and cheaper rate without risking ERCs or using up your overpayment allowance for the new deal.

Now, before overthinking it, my question to you would be:

"Do you really need a mortgage with unlimited overpayment facility?"

Most mortgage products nowadays allow up to 10% of the mortgage debt to be repaid without penalty each year and there are others that allow up to 20% without compromising on the rate. 

Unlimited Overpayment Mortgage Lenders

If you really do want to make multiple unlimited overpayments, then you should look for products with no ERCs or products that allow you to repay all but £1 without charge.  You will pay for the extra flexibility, but Coventry, Hinckley & Rugby, Newbury, Nottingham, Leeds and Metro Bank all have variable rate mortgages that allow unlimited overpayments.

It's essential for borrowers to carefully review the terms and conditions of a mortgage product to understand the overpayment options available. Some mortgages may allow for penalty-free overpayments up to a certain limit – and exceeding that limit may incur charges.

Offset and Current Account Mortgages for Increased Flexibility with Overpayments

Whilst the lenders listed above allow overpayments and some of them will allow you take payment holidays or underpayments against any banked credits, not all of them will allow you to borrow the money back should your situation change.  The most flexible mortgages available are offset mortgages and current account mortgages. 

With an offset mortgage, you can make overpayments into a linked savings or current account and instead of receiving interest on the investment, the savings balance is used to offset the mortgage balance before calculating the interest charged on your mortgage.  You can then elect to either pay a reduced monthly payment or keep your monthly payments the same and reduce your capital balance quicker.  As the overpayments are held in a savings/current account they can be accessed at any point in the future should you need the funds. 

A current account mortgage operates as one account with the mortgage debt, current account balance and even credit card debts all held in one big pot.  It takes a bit of getting used to seeing a current account debt of say £125,000, but for the financially astute it can be one of the quickest ways to repay your mortgage.  Unfortunately, these current account mortgages are very uncommon at the moment.

Remember that mortgage terms and conditions can change, and it's crucial to seek professional advice and thoroughly review the terms of any mortgage agreement before making a commitment.

Speak with one of our independent mortgage advisers who can discuss your options on 0330 433 2927 or submit an enquiry to discuss this with one of our consultants.

Ask The Mortgage Experts answers are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We recommend you seek professional advice with regard to any of these topics where appropriate.