Should I overpay my mortgage or invest?
Overpaying your mortgage is a guaranteed return. Investing is a probably-higher but uncertain return. Here's how to think about the trade-off — with a calculator to see exactly what overpaying would save you.
Overpaying your mortgage is a guaranteed return. Investing is a probably-higher but uncertain return. Here's how to think about the trade-off — with a calculator to see exactly what overpaying would save you.
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.
Overpaying at a 4.8% mortgage rate gives a 4.8% tax-free, risk-free return. Locked in. No surprises.
A global stocks-and-shares ISA has historically returned around 7% real (after inflation) over 20+ years — but with double-digit drops along the way and zero guarantee. Over 5-year windows you've sometimes ended up flat or down.
If you're risk-averse, can't tolerate seeing your investment drop 30%, or your time horizon is under 10 years, the guaranteed mortgage return is the saner choice.
Pension contributions get tax relief. A higher-rate taxpayer putting £100 into a pension costs them £60 net — that effectively turbocharges any investment return inside. For higher-rate earners, maxing pension contributions before overpaying often wins.
Stocks-and-shares ISAs grow tax-free. £20,000/year can be sheltered. Outside of an ISA or pension, capital gains and dividend taxes shrink your returns and make overpaying more competitive.
Most sensible: keep employer pension matching first (free money), then a sensible split between overpaying (peace of mind, guaranteed) and investing in an ISA (potential upside, accessible). A common split is 50/50 of any spare cash after pension and emergency fund.
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.