Mortgage Overpayment vs Invest Calculator 2026/27

Should you overpay your mortgage or invest that money each month? Compare the guaranteed interest saving against potential investment growth over your chosen timeframe.

Winner at 10 Years
£0
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Interest Saved (Overpayment)
£0
Investment Pot Value
£0
Winner · Advantage
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Mortgage Paid Off Early By
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Investment Pot Monthly Income
£0
Effective Investment Return
0%
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Overpayment vs Investment Growth Over Time
Why This Decision Matters

The core trade-off is between a guaranteed, risk-free saving (overpaying your mortgage) and a potentially higher but uncertain return (investing). Overpaying your mortgage saves interest at your exact mortgage rate - this is guaranteed and effectively a risk-free return equal to your interest rate. Investing in a diversified ISA has historically returned around 6-8% per year over long periods, but this is not guaranteed and values can fall. As a rule of thumb: if your mortgage rate is above 5-6%, overpaying becomes increasingly attractive. If your rate is below 4%, investing via an ISA has historically won comfortably. In between, personal risk tolerance matters most. Offset mortgages offer a middle path - savings linked to your mortgage reduce the interest charged without locking money away. Always ensure you have 3-6 months of expenses in an accessible emergency fund before overpaying or investing.

Overpayment vs Investment · £500/month on a £200,000 Mortgage at 4.5%

Years Interest Saved (Overpay) Investment Pot at 5% Investment Pot at 7% Investment Pot at 9%
5 years ~£8,200 £34,100 £35,900 £37,800
10 years ~£19,500 £77,600 £86,900 £97,600
15 years ~£34,100 £132,900 £160,700 £196,500
20 years ~£51,900 £205,500 £269,900 £360,500

Overpayment interest saving is cumulative through to that date, assuming a 20-year remaining term at 4.5%. Investment figures assume contributions within an ISA at the stated annual return, compounded monthly. Past investment returns are not guaranteed.

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Frequently Asked Questions

Should I overpay my mortgage or invest the money?
It depends primarily on your mortgage interest rate versus your expected investment return after tax. If your mortgage rate is higher than your expected investment return, overpaying wins because the guaranteed saving exceeds the likely investment gain. If your mortgage rate is lower than your expected return (e.g. investing in a diversified index fund inside an ISA returning 7%), investing typically wins over the long term. However, overpaying is risk-free and guaranteed while investment returns are not.
How does the ISA allowance affect this decision?
Using an ISA wrapper for your investments means all returns are completely tax-free, which makes investing significantly more attractive compared to holding investments outside an ISA. The annual ISA allowance for 2026/27 is £20,000. If you can invest within an ISA, the effective return is higher than if you paid tax on dividends and gains in a general investment account. The ISA essentially lifts the break-even mortgage rate at which investing starts to win.
What is a good mortgage rate threshold for deciding to overpay?
As a rough rule of thumb, if your mortgage rate is above 5-6%, overpaying often becomes more attractive than investing, because it becomes harder to reliably achieve returns above that threshold after charges and tax. If your rate is below 4%, investing in a globally diversified index fund via an ISA has historically outperformed over the long term. In the middle ground (4% to 6%), the decision is finely balanced and personal factors such as risk tolerance matter considerably.
Can I do both - overpay my mortgage and invest?
Yes, and many people find a split approach sensible. For example, you might overpay enough to build equity or reduce your loan-to-value band (which can unlock better remortgage rates), then invest the remainder. Most mortgage lenders allow overpayments of up to 10% of the outstanding balance per year without early repayment charges. There is no rule requiring you to choose one strategy exclusively.

For informational purposes only · Not financial advice · Investment returns are not guaranteed · Tax rates shown are for 2026/27 · Consult a qualified financial adviser before making decisions