Overpay the mortgage, or invest instead?
Overpaying earns your mortgage rate, guaranteed and untaxed. Investing has to clear that after tax before it wins anything at all. Here is the rate it has to beat.
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The loan you have
The money and the choice
4.46%
Your loan costs 4.25%, and overpaying earns that guaranteed and untaxed. Because investment gains are taxed, the market has to return 4.46% before tax just to draw level. Below that, overpaying wins without taking any risk.
- Portfolio if you overpay
- €114,952
- Portfolio if you invest
- €151,813
- Interest never paid
- €30,779
- Loan ends earlier by
- 7 years 5 months
Investing comes out ahead by €36,861
On the same end date, assuming the market returns 7.00% a year every year. It will not: that is the whole risk you are being paid to take.
Both sides are compared on the date the loan would originally have ended, so neither benefit is counted twice. Overpaying is certain. The investment return is a guess, and money in a loan cannot be withdrawn if you need it.