Mortgage Overpayment

Description:  This calculator shows the effects of overpaying a mortgage, in reducing the term and the effective cost overall. The actual payment made each month is taken to be the sum of the normal 'Repayment Mortgage' payment for the term chosen (as reduced by any prior overpayments)  -plus-  the stated overpayment (increasing on each anniversary, if this option is chosen),  --subject to--  any minimum given for the overall payment (again increasing on each anniversary, if this option is chosen).
[If your normal monthly repayment is not re-calculated for earlier overpayments, so that past overpayments reduce the term rather than reducing future payments, then enter the 'Minimum' as the initial level of normal payments plus your chosen overpayment.]

The 'Discount Rate' is used to allow for the time-cost of money, in the "Effective Overall Cost (Present Value of all payments)". This can be thought of in two different ways:- (A) An allowance for inflation : if you enter 4% then 104 to be paid in 1 year's time is considered equivalent to 100 paid today;  -OR-  (B) An allowance for net interest foregone : for instance, if instead of making an overpayment of 100 today, you placed that amount into a savings account receiving 4% net interest, then you'd be able to pay-off 104 in a year's time (so paying-off 104 after a year is considered equivalent in cost to paying-off 100 now).