Should You Overpay Your Mortgage or Invest? Pros and Cons

It’s a common financial dilemma: if you find yourself with some spare money each month, should you use it to overpay your mortgage or invest it instead?

It is not a simple “one-size-fits-all” decision — and lately, there’s also been growing interest in whether paying your mortgage weekly instead of monthly can lead to savings. Let’s unpack the pros and cons of each approach and help you consider what might be right for your circumstances.

1. Overpaying Your Mortgage: The Pros and Cons

The Advantages

• Guaranteed savings: Every overpayment reduces the capital owed, meaning you pay less interest overall. This is effectively a risk-free return equal to your mortgage interest rate.

• Clear financial progress: Overpaying shortens your mortgage term and can bring you closer to being debt-free which is a major milestone for many.

• Peace of mind: Reducing debt can improve your sense of financial security and reduce future monthly obligations.

The Downsides

• Opportunity cost: Mortgage interest rates are often lower than potential returns from investments. You could be missing out on long-term growth.

• Tied-up money: Once you overpay, those funds are locked into your property. If you suddenly need the money, accessing it may require refinancing or selling.

• Limited flexibility: You might have early repayment charges (ERCs) on your mortgage, you must understand your lender's overpayment terms first.

2. Investing Your Spare Cash Instead

Why It Can Make Sense

• Higher long-term returns: Historically, diversified investments such as stocks and funds have delivered average annual returns higher than most mortgage rates.

• Liquidity: Investments are (generally) easier to access than overpaid mortgage equity.

• Compounding power: The earlier you invest, the more time your money has to grow through compounding, which can be a major wealth builder over decades.

There Are Risks

• No guarantees: Markets fluctuate, and your returns may vary. There is a risk of loss, particularly in the short term.

• Emotional discipline required: Investing requires a long-term mindset. Market dips can tempt people to panic-sell or pause their strategy.

• It may feel less “safe” than paying off a known debt.

3. Weekly vs Monthly Mortgage Payments — Does It Make a Difference?

You may have heard that paying your mortgage weekly rather than monthly can save you money — and in some cases, this is true.

Why It Works

Most UK lenders calculate interest daily. If you make more frequent payments, you reduce your outstanding balance faster, which means less interest accrues over time.

Even if the amount you pay annually stays the same, weekly or fortnightly payments can slightly reduce the overall interest paid and shorten your mortgage term.

However…

Things to Watch For

• Not all lenders support weekly payments — some only accept monthly or biweekly.

• Make sure payments are being applied as you intend — directly to the mortgage balance, not held in a suspense account.

• You might only see a real saving if you’re paying more overall. For example, splitting a £1,000 monthly payment into four £250 weekly payments won’t save much unless the lender calculates interest daily and credits payments immediately.

You should always check with your lender or broker before switching payment frequency.

4. So, Should You Overpay or Invest?

It really depends on your situation. Here are some questions to ask:

Overpaying may suit you if:

• Your mortgage rate is relatively high.

• You are risk-averse or dislike the idea of owing money.

• You’re close to retirement and want to reduce future outgoings.

• You’ve already used your ISA and pension allowances.

Investing may suit you if:

• Your mortgage interest rate is low.

• You have time on your side — particularly if you're under 50.

• You have a healthy emergency fund and manageable debt.

• You’re comfortable with risk and market fluctuations.

5. Do Both?

Absolutely — and many people do.

For example, you might:

• Overpay a small amount on your mortgage monthly, reducing debt gradually.

• Invest regularly into a Stocks & Shares ISA or personal pension for long-term growth whilst maximising tax-free allowances.

• Review your strategy annually to stay on track with your goals.

The key is to align your actions with what’s most important to you, whether that’s reducing debt, building wealth, or simply improving peace of mind.

Understand Your Numbers, Then Decide

There’s no universal answer here. Overpaying your mortgage can provide guaranteed savings and peace of mind, while investing offers the potential for greater long-term growth, but with more risk.

Before making any decision, take the time to:

• Review your interest rate.

• Assess your investment goals and risk appetite.

• Ensure you have a solid emergency fund in place.

• Check your mortgage terms (especially for overpayment limits or penalties).

Need Help Deciding? Let's Talk

Everyone’s circumstances are different and what works for one person may not suit another.

As a financial adviser, I help clients weigh up these exact questions every day. If you’d like support building a strategy that fits your goals, whether that’s paying off your mortgage early, investing for the future, or both, let’s have a chat. Get in touch to arrange a free initial consultation to explore your options and get a clear, confident plan in place.

This blog post is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

• The value of investments and any income from them can fall as well as rise. You may not get back the full amount invested.

• An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA.

• Past performance is used as a guide only; it is no guarantee of future performance.

• Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing debts against your home.