What does overpaying the mortgage actually save?
Add a fixed amount to the monthly payment and see the years and interest it saves — priced against a guaranteed return, not a guess.
The rate the lender quotes.
Voluntary, on top of the required payment. Goes entirely to the balance.
More options(3)
What the same money might earn instead, if invested rather than paid to the lender.
Starts at the 30-year fixed national average published by Freddie Mac Primary Mortgage Market Survey on 2026-10-08 (2 days ago). It is a national average, not a quote, and not a rate anyone is offering you — change it to whatever you have actually been quoted.
Owing $250,000 at 7.4% over 25 years
$79,252
Paying an extra $200 a month clears the mortgage 5 years 8 months early and saves $79,252 in interest — a return that is guaranteed, because it is interest you were certain to owe and now will not.
- Time saved
- 5 years 8 months
- Interest saved
- $79,252
- Guaranteed effective return
- 7.66%
The balance falls slowly at first for the same reason every amortising loan does: interest is charged on what you still owe, and early on you still owe nearly everything.
Overpaying vs investing the same money
$200 a month for 25 years, put toward the mortgage instead of invested
Overpay the mortgage — guaranteed
$79,252
Interest that is certain not to be charged, at 7.66%.
Invest it instead — assumed
$156,608
If returns average 7% a year.
If returns average…
Nobody knows which of these happens
| Assumption | Value after the same span |
|---|---|
| 4% a year — cautious | $101,770 |
| 7% a year — middle | $156,608 |
| 10% a year — optimistic | $246,665 |
Markets do not return the same amount every year. The band shows the same plan under three different assumptions, so you can see how much the answer depends on a number nobody knows.
One thing about the rate
A lender quoting 7.4% charges 0.617% a month — the annual figure divided by twelve, which is how lending is quoted. Compounded over a year that works out at 7.66%, slightly more than the headline, and it is that effective figure — not the quoted one — that overpaying actually returns.
Why overpaying is a guaranteed return, not an assumed one
Every pound put toward the mortgage today is a pound that stops being charged interest at the lender's rate, for every month remaining on the loan. That is a return in the same sense an investment return is — money grows because a rate is applied to a balance — except this one is not a forecast. The loan repayment calculator shows why the effective rate a lender charges runs slightly above the quoted one; overpaying returns exactly that effective figure, because it is the rate being avoided.
This is the honest way to frame the question “should I overpay the mortgage or invest instead”, and it is also where this site stops. A guaranteed rate can still lose to an assumed one that turns out higher, or beat it if the assumed one turns out lower — nobody knows which in advance, and the growth calculator exists for pricing the investing side on its own terms. What follows is the arithmetic of each side, not a recommendation.
Why early overpayments do more than later ones
Interest is charged on the balance still owed, so a pound that reduces the balance in year two removes interest charges for every one of the remaining years — far more than the same pound would remove if paid in year twenty-nine. That is why a modest, sustained overpayment early in a long mortgage often saves more in total interest than a much larger one-off payment made later, for the same amount of money.
What the investing comparison assumes
The “invest it instead” figure runs the same monthly amount through the growth engine for the full remaining term, exactly as if it were a standing contribution to an investment account. It deliberately does not try to model what happens after the mortgage clears early under the overpayment plan — at that point the payment that used to go to the lender is free to be invested too, which would make the overpay side's effective comparison larger still. The simpler, flatter comparison shown here is the more conservative one.
What this deliberately leaves out
- Overpayment caps and fees. Many fixed-rate deals cap penalty-free overpayments, commonly around 10% of the balance a year, and some early-repayment charges apply outside that. Check the actual mortgage terms before assuming the full amount is fee-free.
- Tax. Investment returns and mortgage interest are treated very differently depending on country, account type and whether the property is a main residence. This tool prices the arithmetic only — see the rules at the top of the site for why tax is never modelled here.
- Remortgaging and rate changes. The rate here is held constant for the whole term. A mortgage that moves off a fixed deal partway through will not track this schedule exactly.
- Liquidity. Money paid into a mortgage is generally much harder to get back out than money in an investment account — a real difference between the two sides that no interest-rate comparison captures.
Common questions
Is it better to overpay the mortgage or invest the money?
Why does the guaranteed return use the effective rate, not the quoted one?
Why do early overpayments save more than later ones?
Does this account for overpayment limits or early repayment charges?
Not advice. This tool applies arithmetic to assumptions you entered. It does not know your circumstances, your tax position or your goals, and it is not a recommendation to buy, sell or hold anything. Past returns do not predict future ones, and no figure here is a forecast.