Paying extra off your mortgage

If you find yourself with some extra money, depending on your mortgage type, variable or fixed, you may be able to pay extra off your mortgage and save money by reducing the amount of interest you will pay. It could also reduce the term left of your mortgage meaning it’s paid off quicker.

With a fixed rate mortgage you may be charged a fee or penalty for paying extra, such as a percentage amount of your regular repayment. If you want to pay extra off your mortgage but are on a fixed rate this is worth discussing with your lender as there could still be savings to be made even if you do have to pay a penalty.

With a variable rate you can pay more, without a penalty, in two ways:

Pay a lump sum

You can make a large single payment off the capital part of your mortgage. This will have the effect of either reducing your monthly repayments or shortening the term of the mortgage, but either way you will repay less interest and save money. With this option it is important that you instruct your mortgage provider to pay the lump sum off the capital part of your mortgage.

If you have 25 years left on a mortgage of €220,000 at 3.5% APR and you make a lump sum payment of €10,000, you could reduce your monthly repayments by €50 and save just over €5,000 in interest.

However, if you were to make the lump sum payment and continue making the same monthly repayments you would save yourself €13,215 in interest, and your mortgage would be paid off 1 year and 9 months earlier.

Pay more each month than the agreed amount

If you can afford to pay more than your agreed monthly mortgage amount you will repay your mortgage faster and save money by paying less interest. It may be possible to make this type of overpayment by standing order or an online transfer using your internet banking.

If you have 25 years left on a mortgage of €220,000 at 3.5% APR and you can pay an extra €100 per month, you will save around €18,000 in interest and pay your mortgage off three years quicker

You can use our extra mortgage payments calculator to work out how much an increase in your monthly mortgage repayments could save you.