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Should I overpay to end a fixed-rate mortgage early? [duplicate]
I would strongly encourage you to either find specifically where in your written contract the handling of early/over payments are defined and post it for us to help you, or that you go and visit a licensed real estate attorney. Even at a ridiculously high price of 850 pounds per hour for a top UK law firm (and I suspect you can find a competent lawyer for 10-20% of that amount), it would cost you less than a year of prepayment penalty to get professional advice on what to do with your mortgage. A certified public accountant (CPA) might be able to advise you, as well, if that's any easier for you to find. I have the sneaking suspicion that the company representatives are not being entirely forthcoming with you, thus the need for outside advice. Generally speaking, loans are given an interest rate per period (such as yearly APR), and you pay a percentage (the interest) of the total amount of money you owe (the principle). So if you owe 100,000 at 5% APR, you accrue 5,000 in interest that year. If you pay only the interest each year, you'll pay 50,000 in interest over 10 years - but if you pay everything off in year 8, at a minimum you'd have paid 10,000 less in interest (assuming no prepayment penalties, which you have some of those). So paying off early does not change your APR or your principle amount paid, but it should drastically reduce the interest you pay. Amortization schedules don't change that - they just keep the payments even over the scheduled full life of the loan. Even with prepayment penalties, these are customarily billed at less than 6 months of interest (at the rate you would have payed if you kept the loan), so if you are supposedly on the hook for more than that again I highly suspect something fishy is going on - in which case you'd probably want legal representation to help you put a stop to it. In short, something is definitely and most certainly wrong if paying off a loan years in advance - even after taking into account pre-payment penalties - costs you the same or more than paying the loan off over the full term, on schedule. This is highly abnormal, and frankly even in the US I'd consider it scandalous if it were the case. So please, do look deeper into this - something isn't right!