I Had No Idea My Mortgage Was Costing Me This Much

We've had a mortgage for almost 6 years now. We've made our payments every month without fail, and thought that was basically it. Job done. Responsible adults. Gold star for us ✅

And whilst I recall our first mortgage advisor 'strongly recommending' we overpay, we either never had the spare cash, or we just never looked any closer. We didn't ask questions. We just... paid it. Like very dutiful financial ostriches with our heads firmly in the sand.

Then one day I actually looked at the breakdown. And I had to read it twice.

Every month, we're paying £521 towards our actual mortgage balance.

Which sounds okay, right? Progress is being made. The number is going down. Adulting successfully.

Except we're also paying £928 in interest.

Nearly a thousand pounds. Every single month. Just in interest. Gone. Not coming back. Not building anything. Just disappearing while I congratulated us on being so on top of things.

And here's the bit that really got me. Our interest rates aren't even that bad. We're on 4.59% and 2.94% (we're greedy and have two mortgages on one property). We're not in some disastrous deal that belongs on Panorama. This is just... how mortgages work. And we had absolutely no idea.

So why does this happen?

When you take out a mortgage, your balance is at its highest point - so that's when you're paying the most interest, because interest is calculated on what you still owe. The bigger the balance, the bigger the interest chunk.

Think of it like this. If you owe £300,000 and your rate is 4.5%, you're paying around £13,500 a year in interest (that's £1,125 a month) before a single penny comes off your actual debt. Your monthly payment isn't split 50/50 between interest and your balance (this is what I assumed). In the early years, interest takes the lion's share.

Over time, as you chip away at what you owe, more of your payment gradually shifts towards the actual debt. But at the start of the journey? You're mostly paying the lender.

Sadly, it's not a scam. It's not the bank being sneaky. It's just mathematics. But it's mathematics that nobody really explains to you when you're signing on the dotted line, nodding along and pretending you understood everything the mortgage advisor said.

(Just me? Okay then.)

The moment it clicked for me

I wasn't looking at my mortgage statement to have some great financial awakening. I was looking at it because I was thinking about going self-employed and needed to actually understand what we owed. Very unglamorous origin story, I know.

And when I saw that £521 vs £928 split, something changed. We had moved from a shared ownership property into a 4-bed detached. We got the forever home. And at this moment in time, most of what we pay every month isn't even reducing what we owe.

I felt humbled. A mortgage is probably the biggest financial commitment most of us will ever make, and we'd essentially been ignoring the important details for years.

And when I'm sitting there deciding whether I can really justify continuing to shop at Sainsbury's (Nectar and Aldi Price Match only of course), and the banks are turning a profit of at least a billion pounds a year, I find myself getting a little bit twitchy.

That's when we started looking at overpaying.

What overpaying actually does

When you overpay your mortgage, that extra money goes directly off your balance. And because your interest is calculated on your balance, a lower balance means less interest the following month. It's a small shift at first, but it compounds. And it means more of your regular payment starts going towards capital too.

Now here's where it gets interesting. Let me show you what this looks like in real numbers - because this is the bit that made me sit up very straight.

The difference between £100 vs £500 overpayments

Let's take a £200,000 mortgage at 4.5% over 25 years. Your standard monthly payment would be around £1,112.

No overpayment: Total interest paid £133,499 ; Interest saved £0 ; Mortgage paid off 25 years

+£100/month: Total interest paid £112,357 ; Interest saved £21,142 ; Mortgage paid off 21.5 years

+£500/month: Total interest paid £69,612 ; Interest saved £63,887 ; Mortgage paid off 13.9 years

£100 a month - roughly the cost of a couple of takeaways and a streaming subscription you've forgotten you're paying for - saves you over £21,000 in interest and knocks three and a half years off your mortgage.

£500 a month saves you nearly £64,000 and means you own your home outright in under 14 years instead of 25.

I'll just leave that there for a moment.

Now, I know £500 a month feels like a lot. It is a lot. I'm not suggesting we all find a spare £500 down the back of the sofa. But this is exactly why I started looking at side hustles. Not to fund anything exciting, but to throw money directly at our mortgage and watch those numbers reduce. Even getting partway there makes a meaningful difference. And frankly, knowing what I know now, I wish I'd started looking at this years ago.

The other thing nobody told me

Every pound you overpay reduces next month's interest calculation immediately. It's not something that kicks in at the end of the year. It starts working straight away. On our mortgage at 4.59%, every £100 we overpay saves around £4.59 in interest every year going forward. That might sound small on its own, but overpay consistently and those savings stack up fast.

So what can you do right now?

Go and find your mortgage statement. Look for the breakdown between what's going to capital and what's going to interest. If you haven't looked in a while (and no judgement if you haven't, because I absolutely hadn't) it might surprise you.

Then ask yourself: is there anything, even a small amount, I could be putting towards this?

You don't have to overhaul your entire life. A side income of even £100-200 a month, thrown consistently at your mortgage, starts doing some real work over time. That's the whole reason I'm on this journey, and it's exactly why I'm sharing it - because nobody should get to year five of their mortgage and suddenly realise where their money has been going.

I'm not a financial advisor - just someone on the same journey as you, figuring this out in real time and sharing what I learn along the way. The numbers above are illustrative examples, not personalised financial advice. Always speak to a qualified mortgage advisor before making changes to your mortgage.

📲 I share my real overpayment updates and side hustle income over on Instagram. Come and follow along and let me know what your own capital/interest split looks like. I'd love to know I'm not the only one who did a double take. Find me at @overpaythemortgage