Is it better to overpay the mortgage or invest?

Overpaying earns your mortgage rate guaranteed and tax-free; investing has to beat that rate after fees and tax, and might not in any given decade. At mortgage rates around 4-5%, the expected edge of equity investing is real but modest, and it carries risk the overpayment doesn't. Many people split the difference deliberately.

How much difference does overpaying £200 a month make?

On a £200,000 mortgage at 4.5% with 25 years left, roughly £30,000 of interest saved and about 5 years cut from the term - exact figures depend on rate and term, which this calculator computes month by month.

Are there limits on overpaying?

Most fixed deals allow 10% of the balance per year without penalty; beyond that, early repayment charges of 1-5% can apply. Check your deal before setting up a large overpayment - and clear expensive debt and build an emergency fund first.

Mortgage overpayment calculator: and the honest invest-instead comparison

The interest saved and years cut, computed month by month by the same amortisation the Hundred Summers app uses, then compared, honestly, against investing the same monthly amount: guaranteed saving versus expected-but-uncertain growth. Your figures never leave your browser.

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Worked example

Computed when this page was built by the same engine that runs the calculator above, so the figures below and the live tool can never disagree. Change any input above to see your own.

Inputs
Mortgage	£200,000 at 4.5% over 25 years
Spare a month	£250
Investment growth	5.0%

Results
Overpaying: interest saved	£42,365
Overpaying: years saved	7.2
End wealth advantage (overpay	£137,583
End wealth advantage) invest	£143,181
Which wins on these assumptions	Investing

The next question

Would switching mortgage save more? →Remortgage calculator

Or answer it with everything else: the full Hundred Summers plan connects your pay, pensions, savings, property, tax and spending year by year, and stress-tests them across 500 simulated market histories.

Read the guides

Overpay the mortgage or invest? The honest arithmetic →
Overpaying earns your mortgage rate guaranteed and tax-free; investing has to beat it after fees, tax and nerve. How to compare the two properly, including what happens after the mortgage clears early.
Your mortgage: how the payment is built, what the term costs, and what a rate change does →
Why half of every early payment is interest, what stretching the term to 35 years really costs, the interest-only trap, and how a two-point rate rise moves the monthly figure, with the arithmetic behind each.

What overpaying really earns

Every pound overpaid stops accruing interest at your mortgage rate for the rest of the term: a guaranteed, tax-free return equal to your rate. No investment offers that certainty. The month-by-month effect compounds: overpayments shrink the balance, which shrinks the interest, which makes every later payment clear more capital, which is why modest monthly sums cut whole years off the term.

The honest comparison with investing

Investing the same money is expected to beat a 4–5% mortgage over long periods, but not guaranteed to, and not smoothly. The fair comparison also credits the overpayment route with what happens after the mortgage clears early: the whole freed payment can then be invested for the saved years. The calculator above does both sides properly. Tax matters too: inside an ISA the comparison is clean; outside one, dividend and capital gains tax drag the investing route.

Two prior claims on the money beat both routes: expensive debt, and an emergency fund. And check your deal's overpayment allowance (typically 10% a year) for early repayment charges. The full Hundred Summers plan models the overpayment inside your whole lifetime picture: the ISA vs pension question is often the real competitor for the money.

Education, not advice. The right split depends on risk tolerance, tax position and your deal's terms. For a personal recommendation speak to an FCA-regulated financial adviser; free impartial guidance is available from MoneyHelper.