Is it better to regularly overpay the mortgage, or save and invest in stocks and shares?

03 November 2021

Question by Andrew

Is it better to regular overpay the mortgage, or save and invest in stocks and shares?

There is no guarantee that the shares will increase, but there is a chance the shares will increase greater than the benefit of the reduced interest payments on the mortgage.

Answered by Boring Money

Hi Andrew,

You have alluded to the answer in your question. This all comes down to whether or not your investments are going to outperform your mortgage interest rate. Unfortunately we have no way of knowing if this will happen or not. However, as interest rates are very low at the minute this is an easier target to beat.

This will largely depend on what you are invested in and how much risk with these investments you are willing to take. The safe option is to pay off your mortgage as you pay it off and you know exactly how much you are going to save by doing this. With this safety you lose out on upside, you will never earn more or less than the interest that you save.

The riskier option is to put that money into investments. You might not earn as much and you could in fact lose money depending on what you invest in. However, there is higher upside in that any outperformance over your interest rate (after charges) is money that you would not have had otherwise.

It is also worth remembering that investing is a long term game. You should be thinking 5-7 years+ as a term of investment.

Hopefully this helps, if you have any more questions then please let me know.

Luke James

Independent Financial Adviser

Answered by

Boring Money