How to pay off your mortgage in 10 years (or 7)

The short answer: clearing a £200,000 mortgage at 6% in 10 years instead of 25 means paying about £2,220 a month rather than £1,289, an extra £932 every month. In return you save about £120,132 in interest. Whether you can do it comes down to that monthly figure, and to how much your lender lets you overpay.

What each term costs a month

This shows the monthly payment and total interest on £200,000 at 6% for different terms, with nothing but the payment changing.

Cutting the term from 25 to 10 years takes interest from £186,581 to £66,449. Going to 7 years takes the payment to £2,922 a month and interest down to £45,424.

The payment depends heavily on your rate

A 10-year payment on £200,000 at different rates:

• 4%: £2,025 a month
• 5%: £2,121 a month
• 6%: £2,220 a month
• 7%: £2,322 a month

A higher rate means a bigger payment, but it also means each pound of overpayment saves more interest.

Getting there by overpaying

You do not have to switch to a 10-year mortgage to get there. If you keep your existing deal and overpay each month, the mortgage ends sooner. Here is what happens to a £200,000 mortgage with 25 years left at 6% when you add a fixed amount every month.

The figures climb quickly because the extra money always reduces the balance that interest is charged on. Even modest extra payments make a visible difference over a long term.

Watch the overpayment limit

This is the part most calculators ignore. Many fixed and discounted deals allow overpayments of up to 10% of the balance each year without an early repayment charge. On £200,000 that is £20,000 a year, or about £1,667 a month. The extra needed for a 10-year payoff, £932 a month or £11,182 a year, fits inside that allowance at the start. But as you clear the balance the allowance shrinks with it, so check the terms of your deal before you commit. Paying more than the limit can trigger an early repayment charge, often a percentage of the amount overpaid.

Is it the right move?

Paying a mortgage off early gives you a guaranteed return equal to your mortgage rate and removes your biggest monthly cost. It also locks the money into your home, which is hard to get back without remortgaging. Before committing to a big monthly overpayment, consider:

1. Clearing any more expensive debt first. See which debt to pay off first.
2. Keeping an emergency fund, so a job loss does not force you into borrowing.
3. Taking any employer pension match.
4. Comparing the return with saving: see overpay your mortgage or save.

If you are not sure how much you can borrow or repay, the mortgage calculator shows the payment for any amount, rate and term.

How much of the mortgage have you actually paid off?

People are often surprised how little of the balance goes down in the early years of a normal term. On the £200,000 mortgage at 6% over 25 years, the balance after 5 years is £179,864 and after 10 years £152,704, so only 24% has been repaid after a decade, because most of each early payment is interest. A 10-year term clears it fully in the same period, which is why the monthly payment is so much higher.

What a 10-year payoff costs for different loans

The monthly payment scales with the loan. At 6% over 10 years:

• £100,000: £1,110 a month, £33,225 in total interest
• £150,000: £1,665 a month, £49,837 in total interest
• £200,000: £2,220 a month, £66,449 in total interest
• £300,000: £3,331 a month, £99,674 in total interest
• £400,000: £4,441 a month, £132,898 in total interest

If the payment is more than you can sustain, 15 years or 12 years may be a better target than 10: the saving is smaller, but so is the monthly strain. The extra payment can also be a lump sum, such as a bonus or inheritance, instead of a monthly amount.

Should you shorten the term or keep the payment and overpay?

Switching to a shorter term commits you to the higher payment, which the lender will insist on. Overpaying when you can on a normal term lets you pay less in a bad month. Overpaying gives you the same interest saving with more flexibility, which is why many people prefer it, as long as they stay inside the overpayment limit.

This is general information, not financial advice. Figures assume a fixed rate for the whole term; in practice rates change when you remortgage. Check your lender’s overpayment limits and early repayment charges.