After a decade of rock bottom interest rates and spiraling house prices, many homeowners have loaded up on mortgage debt. Borrowing at 2% or 3% to buy an asset that is rising by 10% or 15% a year made financial sense before, but now it's payback time.

Somebody with a £200,000 capital repayment mortgage charging 3% would pay £948 a month with interest totaling £84,478 over a standard 25-year term.

However, if they overpaid by another £100 every month, they would save interest totaling a massive £12,429.

If they overpaid by £200 a month, the total interest saving would rise to £21,609.

In the above example, the £100 monthly overpayment would help you clear your debt three years and four months early, while £200 would clear it five years and 11 months earlier.

If you put a £10,000 cash windfall against the same mortgage you would save £10,549 in interest and clear your debt one year and nine months early. Or even faster if you make monthly overpayments as well.
 

If you put a £10,000 cash windfall against the same mortgage you would save £10,549 in interest and clear your debt one year and nine months early. Or even faster if you make monthly overpayments as well.

Most mortgages now let you overpay by up to 5% or 10% a year without penalty. 

Be warned, though, you may face an early repayment charge during the introductory period on a discounted variable rate or fixed rate deal.

Your money works harder when paying down a mortgage charging 3% or 4% rather than earning 1% from a savings account or cash Isa. 

However, mortgage overpayments are difficult to claim back again, so keep some cash in reserve for a rainy day.

If you shrink your mortgage, you will be in a far better position when interest rates finally start rising.

Growing numbers are heading towards retirement with unpaid mortgage debt yet many lenders are reluctant to offer mortgages stretching beyond age 65 or 70.

Overpaying could help clear your mortgage in full by the time you retire or reduce repayments to affordable levels. It can also help older homeowners facing a mortgage shortfall due to an underperforming endowment.

If you need to borrow, say, 95% of your property's value, you will pay more interest than if borrowing 75%. 

By shrinking your debt you can remortgage to a cheaper deal, bringing further savings and accelerating the pace at which you pay off your mortgage.

Do not pay down a mortgage costing 4% if you owe money on a credit card at 20% or store card at 30%. Tackle the most expensive ones first.