Mortgage overpayment vs investing — which wins?
Overpaying gives you a guaranteed, tax-free return equal to your mortgage rate. Investing in a global tracker has historically returned ~7% real but with risk. Here's the framework for choosing.
Overpaying gives you a guaranteed, tax-free return equal to your mortgage rate. Investing in a global tracker has historically returned ~7% real but with risk. Here's the framework for choosing.
You'll be mortgage-free 6 years 9 months earlier
and save £46,940 in interest.
| Without | With overpay | |
|---|---|---|
| Term | 25 years | 18 years 3 months |
| Total interest | £156,277 | £109,338 |
| You save | £46,940 · 6y 9m |
A lower interest rate could save you thousands more on top. See if you could remortgage to a better deal.
We may receive a commission if you remortgage through a partner broker. This never affects the rate you're offered.
Every £1 overpaid saves you your mortgage rate in interest, every year, until you'd otherwise have cleared the loan. No tax, no fees, no risk.
Global equity trackers have historically returned ~7% real (after inflation) over 20+ year horizons. Within an ISA, gains are tax-free. But returns are volatile and not guaranteed.
Overpay enough that you'd be happy if the market crashed (peace of mind). Invest the rest in a low-cost global tracker ISA. For most people, that's overpay to 25–50% of the 10% cap, invest the rest.
Important: This article is for general information and is not financial advice. Always speak to a qualified UK mortgage adviser before making decisions about overpayments, remortgaging, or your specific mortgage product.