Overpayment Priority Calculator
Should you overpay your mortgage or student loan? Compare interest savings, write-off impact, and find your optimal debt repayment strategy.
Recommendation: Overpay Mortgage
• Student loan will be written off - overpaying wastes money
• You'll have £116,152 cancelled at write-off
• Mortgage interest is real cost that must be paid
• Mortgage overpayment saves £18,482 guaranteed
Key Insight
For most graduates, mortgage overpayments save real money while student loan overpayments often just pay off debt that would be cancelled anyway.
Mortgage Details
Student Loan Details
Current annual mandatory payments
Strategy Comparison
All to MortgageOPTIMAL
Overpay £10,000 towards mortgage
Mortgage Interest Saved:
£18,482
Mortgage Time Saved:
2.1 years
Optimal for most graduates
All to Student Loan
Overpay £10,000 towards student loan
Mortgage Interest Saved:
£0
Mortgage Time Saved:
0.0 years
SL Interest Saved:
£47,435 (wasted)
Write-off Status:
£58,717 cancelled
Wasteful - loan will be written off
Split 50/50
Overpay £5,000 to each debt
Mortgage Interest Saved:
£9,616
Mortgage Time Saved:
1.0 years
SL Interest Saved:
£23,717 (wasted)
Write-off Status:
£87,435 cancelled
Suboptimal - worse than mortgage-only
Why Mortgage Overpayment Usually Wins
Guaranteed, Tax-Free Return
Mortgage interest savings are guaranteed at your mortgage rate (5%). No tax implications and no risk.
Mortgage is Real Debt
You must repay every penny of your mortgage plus interest. Student loans write off after 30 years with any remaining balance cancelled.
Student Loan Interest Often Irrelevant
If your loan will be written off, you're not actually paying the interest—it just accumulates on a balance that gets cancelled.
Compound Benefits
Overpaying £10,000 now saves £18,482 over the life of your mortgage and pays it off 2.1 years earlier.
£10,000 Overpayment Impact
⚠️ Student Loan Will Be Written Off
Your loan balance will be £58,717 at write-off. Overpaying reduces this but doesn't save you real money—the cancelled amount is free money you're throwing away.
Consider: Offset Mortgage Instead
Rather than permanently overpaying either debt, an offset mortgage gives you 90% of the benefit while maintaining full liquidity:
Offset Benefits
- • Save ~£9,900
- • Keep £10,000 accessible
- • Use for emergencies anytime
- • Protected from SL overpayment mistake
Traditional Overpayment
- • Save ~£18,482
- • Money locked in property
- • Cannot access without remortgage
- • Slight edge in total savings
Offset mortgages provide flexibility while delivering most of the financial benefit of overpayments.
Key Takeaways
For Most Graduates
- • Prioritize mortgage over student loan overpayments
- • Student loan likely to write off with large balance cancelled
- • Mortgage interest is real cost that compounds
- • Guaranteed returns vs uncertain student loan benefits
Exception: High Earners
- • If definitely fully repaying (£60k+ salary consistently)
- • After maxing pension contributions first
- • Compare interest rates carefully
- • Still likely better focusing on mortgage
Understanding the Mathematics
Why Mortgage Overpayment Works
- • You pay interest on every pound until mortgage ends
- • Overpaying reduces balance, saving compound interest
- • Return equals your mortgage rate (4-6% typically)
- • Completely tax-free and guaranteed
- • Also pays mortgage off earlier, freeing up income
Why Student Loan Overpayment Fails
- • Most graduates head toward write-off, not full repayment (check your projection with our student loan calculator)
- • Interest accumulates but gets cancelled with balance
- • Overpayments reduce what gets written off (free money)
- • Only saves money if you'll definitely repay in full
- • Even then, likely smaller benefit than mortgage
Real Example: £10,000 Overpayment Decision
Scenario: Graduate with £180k mortgage at 5% (20 years left) and £45k student loan
Option A: Overpay Mortgage
- • Interest saved: ~£16,000 over remaining term
- • Time saved: 1.5 years earlier payoff
- • Student loan: Continues, writes off with £65k balance
- • Net gain: £16,000 saved + £65k cancelled = £81k benefit
Option B: Overpay Student Loan
- • Interest "saved": ~£6,000 over 40 years
- • But loan writes off anyway with £55k balance
- • Mortgage: Pays full interest, costs £16k more
- • Net gain: £55k cancelled - £16k extra mortgage = £39k benefit
Overpaying mortgage is £42,000 better strategy than overpaying student loan.
Optimize Your Debt Strategy
Understanding the mathematics behind debt repayment helps you maximize your financial benefit and avoid costly mistakes like overpaying student loans heading for write-off.
Explore More Property Resources
Discover additional tools and guides to help you navigate property ownership with student loans