A typical example
A first-time buyer takes out a mortgage on their new home using a 2-year fixed rate at 3%, spread over a 30-year term.
The longer term is chosen to keep monthly repayments low during the early years, when costs such as furnishing, decorating, and moving expenses are at their highest.
Two years later:
- The property is fully furnished
- Household finances have stabilised
- One partner has received a promotion, increasing household income
As the fixed rate comes to an end, this is an ideal opportunity to review the mortgage and consider reducing the term — potentially saving thousands in interest.
Why shorten the mortgage term?
Reducing the term of your mortgage can offer several benefits:
- You repay the mortgage faster
- You pay significantly less interest overall
- You build equity more quickly
For borrowers whose income has increased or whose outgoings have reduced, shortening the term can be a sensible long-term strategy.
Should you shorten the term or make overpayments?
Before committing to a shorter term, it’s important to understand the flexibility of your mortgage product.
Some mortgages — particularly tracker or variable rate products — allow unlimited overpayments at any time without penalty.
By making regular overpayments:
- You reduce the mortgage balance faster
- You effectively shorten the term
- You retain the flexibility to stop overpaying if circumstances change
Overpayment limits and early repayment charges
Not all mortgages are flexible.
- Many fixed rate mortgages limit overpayments to 10% per year
- Some products restrict overpayments entirely during the fixed period
- Exceeding limits may trigger Early Repayment Charges (ERCs)
Shortening the term removes flexibility — higher payments become mandatory — whereas overpayments can usually be paused if income drops or expenses rise.
When shortening the term makes sense
Reducing the term is often most suitable when:
- Your income is stable and likely to remain so
- You have minimal unsecured debt
- You are confident higher payments are sustainable long-term
In other cases, combining a competitive rate with flexible overpayments may be the smarter option.
Why advice matters
Every mortgage product has different rules around overpayments, early repayment charges, and term changes.
A mortgage broker can help you:
- Compare shortening the term vs overpayments
- Understand product restrictions before committing
- Select a mortgage that matches your financial goals
The right structure can save you money while still protecting your financial flexibility.
If you’re considering remortgaging and want to explore whether shortening the term is right for you, expert advice can make all the difference.
Our mortgage advisers can assess your circumstances and help you choose the most suitable option — without obligation.