When does the overpayment allowance reset?
Once a year, on a date your mortgage deal sets: usually either 1 January or the anniversary of when the mortgage or the deal started. Unused allowance usually does not carry forward, so the date decides whether two overpayments a few weeks apart fall in one allowance year or two.
Most fixed and discounted deals let you overpay up to a set amount each year without an early repayment charge. The amount gets most of the attention; the date it resets gets very little, and it can matter as much.
The two usual reset dates
- 1 January. The allowance runs with the calendar year, and everybody on the deal starts again on the same day.
- The anniversary. The allowance runs from the date the mortgage completed or the deal started, so a deal that began on 15 March resets every 15 March.
Some deals describe the allowance as a percentage “in each year of the product” — that is the anniversary kind, counted from when the deal began.
Why the date matters
Take an allowance of £20,000 a year and a plan to overpay £30,000. On a calendar-year allowance, £20,000 in December and £10,000 in January fall in two different years, so neither is above the allowance. On an allowance that resets in March, both land in the same allowance year, and £10,000 of it is over.
The charge applies only to the amount above the allowance. At a 3% charge band, £10,000 over costs £300 — how an early repayment charge is worked out goes through the sum.
Monthly overpayments count too
A regular monthly overpayment uses the same allowance as a lump sum. £500 a month is £6,000 a year against it, so a lump sum later in the same allowance year has £6,000 less room.
Unused allowance
Usually it does not roll over: headroom you have not used by the reset date is gone, and the new year starts from the full amount again. Your offer says whether yours is different.
When the deal ends
The allowance usually matters only while an early repayment charge applies, which on most deals is the fixed or discounted period. After that the charge normally stops, and the limit with it — but your offer is the place to check, because some deals carry a charge for longer.
For what the allowance is a percentage of — the original loan, the balance on a fixed date or the balance outstanding — see what an overpayment allowance is a percentage of. If you put your allowance and charge bands into Mortgage Meadow, the what-if simulator shows what fits inside it.
Questions people ask
Does the overpayment allowance reset on 1 January?
On some deals. Others reset on the anniversary of when the mortgage or the deal started. Your mortgage offer states which.
Can I carry over unused overpayment allowance?
Usually not — most deals reset the allowance each year and unused headroom is lost. Your mortgage offer will say if yours is different.
More guides
- Overpaying the mortgage or saving: what the sums compare
- Lump sum or monthly overpayments: what is the difference?
- How much interest does overpaying a mortgage save?
- What is an overpayment allowance a percentage of?
- Does overpaying reduce the term or the monthly payment?
- How much should my mortgage balance go down each year?