Mortgages
Mortgage overpayments: reduce the term or the payment?
When you make a mortgage overpayment, the bank offers two options: lower the monthly payment or shorten the term. The choice has a big impact on the interest you pay.
Shorten the term
You keep the same monthly payment but finish paying earlier. This option saves the most interest, because you cut the number of months it applies to.
Lower the payment
You pay less each month over the same term. It saves less interest overall but eases your monthly budget — useful if you want more breathing room.
Example: €150,000 over 25 years at 3 %
With a €10,000 overpayment in year 3: shortening the term saves about €9,500 in interest and cuts the loan by ~2 years. Lowering the payment saves about €4,000 but reduces the monthly amount by ~€55.
When to choose each
- Shorten the term: if your goal is to pay less interest and you do not need monthly relief.
- Lower the payment: if you want more monthly liquidity or expect tighter income.
- Check the early-repayment fees in your contract.
Simulate your mortgage and test overpayment scenarios.
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