Mortgages · 9 min read

Mortgage Overpayment vs Investing at 3%, 4%, 5% and 6% Rates

Created by Owen. Owen has been investing independently for seven years and built Your Wealth Calculator to share the tools he wished he had found earlier.

Reviewed 19 May 2026. Uses a £500-a-month worked example to compare mortgage rates with possible investment returns. The certainty/risk trade-off is the point.

The mortgage-versus-investing question changes completely as the mortgage rate rises. At 3%, investing may feel easy to justify. At 6%, overpaying starts to feel less like a conservative choice and more like a strong guaranteed return.

This guide uses a simple scenario: £500 per month for 10 years. It compares the value of overpaying a mortgage at different interest rates with the return an investment would need to justify taking market risk.

Scenario: £500 per month for 10 years

Mortgage overpayment behaves like a guaranteed return equal to your mortgage interest rate, because every pound of debt repaid stops interest from being charged on that pound. The exact mortgage term and lender rules matter, but this comparison is a useful first screen.

Scenario	Total paid in	Approx. value after 10 years	Interest avoided / growth	Investment hurdle
3% mortgage rate	£60,000	£69,871	£9,871	3% after-tax return needed to beat it
4% mortgage rate	£60,000	£73,625	£13,625	4% after-tax return needed to beat it
5% mortgage rate	£60,000	£77,641	£17,641	5% after-tax return needed to beat it
6% mortgage rate	£60,000	£81,940	£21,940	6% after-tax return needed to beat it

For comparison, investing £500 per month for 10 years at a 5% annual return would grow to roughly £77,641 before fees and tax. That is more than overpaying at 3% or 4%, roughly similar to 5%, and lower than the certainty of overpaying at 6%.

The key question

Do not compare your mortgage rate with a headline investment return. Compare it with a realistic after-tax, after-fee, risk-adjusted investment return.

When overpaying starts to look very strong

At lower mortgage rates, investing has a better chance of winning over long periods, especially inside an ISA or pension. At higher mortgage rates, the guaranteed return from overpaying becomes harder to dismiss. A 6% mortgage overpayment is not the same as chasing a possible 6% market return. One is guaranteed if your lender applies the overpayment correctly; the other is uncertain.

When investing can still make sense

Investing can still be sensible if you have a long time horizon, enough emergency cash, no expensive debt, and tax-efficient account space such as an ISA or pension. It can also keep money more accessible than mortgage overpayments, depending on the account used. The price of that flexibility is market risk.

What this simple table leaves out

Overpayment charges or lender limits.
Changes in mortgage rate at remortgage.
Investment platform fees and fund charges.
Tax on dividends, interest or capital gains outside an ISA or pension.
The value of liquidity ; money in an ISA is usually easier to access than money overpaid into a mortgage.

Run the comparison with your figures

Use the Mortgage vs Invest Calculator to compare your mortgage rate, spare monthly cash, investment return assumption and tax wrapper. You can also use the Investment Calculator to test different return scenarios.

Sources and useful reading

Final thought: The higher your mortgage rate, the more valuable certainty becomes. At lower rates, investing may deserve more room; at higher rates, overpaying becomes harder to dismiss.