Two payments hiding inside one
Every monthly payment on a repayment mortgage is secretly two transactions: the interest owed for that month, and whatever is left, which reduces the balance. Early in the term the split is brutally interest-heavy, because interest is being charged on a balance that has barely moved.
An overpayment skips the split. It goes entirely to capital, which is why £200 extra a month is worth so much more than it looks: the balance it removes would otherwise have been charged interest every remaining month of the term, and clearing it early removes all of that future interest with it.
To measure the effect, the calculator amortises your loan twice, month by month: once at your required payment, once with the overpayment added. The gap between the two schedules is the saving, expressed as months removed from the term and pounds of interest never paid. Before sending a penny, though, check two features of your own deal. Most fixed deals cap penalty-free overpayments at 10% of the balance a year, and exceeding the cap can trigger an early repayment charge that wipes out the saving. Lenders also differ on what an overpayment does next: this tool models keeping payments the same and shortening the term, while some default to lowering the payment instead, which saves far less. Ask which one you are getting. The overpayment guide goes through both checks, and what the 10% cap means for a lump sum.
£220 against £214,000
Dan has £214,000 left at 4.6%, paying £1,246 a month. Left alone, the loan runs another 23 years and 5 months and costs roughly £135,400 in interest. Add £220 a month and the term falls to 17 years 11 months, a cut of 66 months. Interest drops to about £99,200, a £36,200 saving. He overpays £47,300 in total along the way, so every £1 sent early saves roughly 77p of interest.
There is a rival use for that £220, and the tool keeps it on screen the whole time. Overpaying earns a guaranteed, tax-free return equal to your mortgage rate: a 4.5% overpayment is a risk-free 4.5%. Invest the same £220 a month instead at 5% real for the same 23 years, sheltered in an ISA so the return is also tax-free, and it grows to about £112,000. More than the interest saved, yes, but only if markets deliver, only if Dan never touches it, and with volatility the whole way there. Against a 4.6% mortgage the two outcomes are genuinely close, and reasonable people choose differently. Which is the honest answer to whether overpaying beats investing: it depends on your rate versus your expected after-tax return, and on how much certainty is worth to you. Overpaying is guaranteed, investing is probable, and many people split the difference and do both.
At the extremes the choice stops being close. Against an 8% mortgage, overpaying almost always wins; against a 1.5% legacy fix, investing almost always does. Just remember which rate you are really comparing: the projection assumes today's rate for the whole term, and rates do not sit still. Fixes end and reprice into whatever the market offers then, broadly tracking the Bank of England's Bank Rate. On a cheap fix the whole-term assumption is optimistic; on an expensive one, pessimistic.
What to settle before the first overpayment
Other debts, almost certainly. A mortgage is usually your cheapest borrowing, and a credit card at 22% should be cleared long before a mortgage at 4.6%; the debt payoff planner handles that queue. A windfall needs sequencing too. Earlier is always better, so a lump sum today beats the same money spread over a year, but only if it does not empty the buffer you keep for emergencies. Size that buffer with the emergency fund calculator before committing a windfall to the loan.
Liquidity deserves a moment of respect as well. Money in the mortgage is hard to get back; money invested is not, and that flexibility has real value the arithmetic cannot show. The model also leaves out tax, product fees and offset-account behaviour, so read its output as a clean comparison of two schedules rather than a complete financial picture.
Pay the mortgage off early and your FIRE plans move twice over: the payments stop, and your required retirement spending falls with them. Model that in the FIRE calculator by lowering target spending from your payoff year.