You have €200 a month spare. Throw it at the mortgage, or into an ETF savings plan? It is one of the few money questions with a genuinely close answer — because you are trading a guaranteed return at your mortgage rate against a higher-but-uncertain one from the market. This calculator runs both paths over your remaining term, taxes the investment gains properly, and tells you the exact return you would need to come out ahead.
By Kestutis Balciunas · Last reviewed: 17 July 2026 · Figures and rules are 2026-vintage estimates — verify current data before acting. Educational tool, not advice.
How the two paths are compared
Path A — overpay. Every extra euro paid into the mortgage stops accruing interest at your mortgage rate, permanently. Financially it is identical to investing that euro at the mortgage rate, risk-free and — in most European countries — tax-free. The calculator compounds your monthly overpayment at the mortgage rate over the remaining term: FV = m × ((1+i)ⁿ − 1) ÷ i, with i the monthly rate and n the remaining months.
Path B — invest. The same monthly amount is compounded at your expected investment return, then the gain portion is taxed at the capital-gains rate you set (default 20% — rates vary widely across Europe, so edit it to your country’s). What is left is the honest, after-tax comparison figure. You can sanity-check the gross growth side in our compound growth calculator.
A worked example
€200/month, 3.5% mortgage, 20 years left, 7% expected return, 20% gains tax. Overpaying grows to €69,374 — guaranteed. Investing grows to €104,185 gross; after taxing the €56,185 gain at 20%, you keep €92,948. Investing is expected to win by about €23,600 — but “expected” is doing heavy lifting in that sentence. The overpayment figure has zero variance; the investment figure is the middle of a wide distribution that includes 20-year stretches of mediocre returns.
The one number to remember
To beat overpaying, your investment must clear the mortgage rate after tax. Grossed up: required return = mortgage rate ÷ (1 − tax rate). At a 3.5% mortgage and 20% tax that is 4.38%/yr — a hurdle diversified equities have historically cleared, but not in every decade. At a 4.5% mortgage and 25% tax the hurdle is 6% — genuinely demanding. This is why the answer flipped for many Europeans when rates rose: cheap 1–2% mortgages made investing obvious; at 4%+ mortgages, overpaying became the rare guaranteed win.
Two European wrinkles worth knowing
First, some countries (the Netherlands, Belgium, and others in specific cases) grant tax relief on mortgage interest, which lowers your effective mortgage rate — enter the after-relief rate for a fair fight. Second, overpaying reduces flexibility: money in the walls is hard to get back out, while an ETF portfolio stays liquid. If your emergency buffer is thin, that liquidity is worth real money.
What the math cannot decide for you
Overpaying suits people who would lose sleep — or worse, panic sell in a crash — because a guaranteed 3.5% you actually keep beats an expected 7% you abandon at the bottom. Investing suits those with secure income, a long horizon and tolerance for a decade of dispersion. Also check your loan terms first: many European mortgages cap penalty-free overpayment at 5–10% of the balance per year. The full decision framework, including the split strategy and when a windfall changes the answer, is in our mortgage vs invest guide for Europe — and if you are weighing a lump sum rather than a monthly amount, the logic in how to deploy €100k of cash applies. Assumed returns and tax rates are illustrative — verify current figures for your country. Not financial advice.
These numbers make more sense with the guide
The free 12-page Starter Kit turns them into decisions: your first fund, a safe broker, and the tax basics for your country.
Frequently asked questions
Q: Is overpaying my mortgage really a ‘return’?
A: Yes — an exact one. Every euro of principal you remove stops costing you the mortgage rate in interest, every year, until the loan ends. Saving a guaranteed 3.5% is mathematically the same as earning a guaranteed 3.5%, and unlike investment returns it is typically tax-free.
Q: What return do I need to beat overpaying?
A: Your mortgage rate divided by (1 minus your capital-gains tax rate). With a 3.5% mortgage and 20% tax that is about 4.4% per year, pre-tax. If your realistic expected return does not clear that hurdle comfortably, the risk-free overpayment is hard to argue against.
Q: Why does the calculator tax only the gains, not the whole pot?
A: Because that is how capital-gains tax works in most of Europe: your contributions are your own money and come back untaxed; only the growth above them is taxable when you sell. The default 20% is a placeholder — rates range from 0% in some situations to over 30%, so set your country’s rate.
Q: Are there penalties for overpaying a European mortgage?
A: Often, yes. Many lenders allow 5–10% of the outstanding balance per year penalty-free, and charge compensation beyond that, especially on fixed-rate loans. Check your contract before committing to a plan — the calculator assumes penalty-free overpayment.
Q: Should I just split the money between both?
A: A 50/50 split is a legitimate answer, not a cop-out, when the numbers are close. You bank a guaranteed saving on half while keeping market upside on the other half — and behaviourally, people stick with a strategy they will not regret in either scenario.