Stage 5 of 7
Overpay, invest, or offset
Compare three common uses for spare cash: reducing mortgage interest, keeping savings offset, or investing for potential growth.
What this stage means
This stage helps you compare the trade-offs when there is spare monthly cash or savings available.
Overpaying can reduce mortgage interest and term. Offsetting can reduce interest while keeping cash accessible. Investing may grow more, but returns are uncertain and capital can fall.
Key numbers to understand
- Mortgage rate, outstanding balance, term, and overpayment allowance.
- Monthly spare cash or savings amount available for the comparison.
- Savings rate, offset balance, expected investment return, charges, and tax assumptions.
- Liquidity needs, emergency fund target, risk tolerance, and time horizon.
Common mistakes
- Comparing guaranteed mortgage interest savings with investment projections as if both are equally certain.
- Overpaying before keeping enough accessible savings for emergencies.
- Ignoring early repayment charges, ISA allowances, tax, investment fees, and personal risk tolerance.
How to interpret the result
Separate certainty from possibility. Mortgage interest saved is more predictable than investment returns.
A higher projected investment value does not automatically make investing suitable if you need access to cash, cannot tolerate losses, or have expensive debt.
Next step in the journey
Before your current deal ends, compare remortgage options and check whether switching, staying, or overpaying changes the plan.
Continue to Remortgage