Should I pay off my mortgage or invest?

It depends on the interest rate you pay, what the money could earn after tax and charges, any early repayment charge, and how much you need to keep within reach.

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Paying off the mortgage saves interest at a known rate for as long as that rate applies. An investment return is not known in advance and its value can fall.

The advisers for this subject: Sunny Bharj and Tony Springer

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The factors

Your mortgage rate: Each pound you pay off stops interest at the rate you pay, for as long as that rate applies. Check when your current deal ends and what rate follows it.
What investing could earn: Compare the mortgage rate with what the money could earn after tax and charges over the same period. Inside an ISA or a pension, investments grow free of income tax and capital gains tax.
Early repayment charges: Your lender can charge for paying off the mortgage early or for overpaying beyond an agreed limit. The charge and the limit are in your mortgage terms.
More expensive debts: Credit cards, store cards and unsecured loans can charge far more interest than a mortgage. MoneyHelper's guidance is to clear them first.
Your pension: Contributions attract tax relief, and a workplace pension adds your employer's contributions. Check whether your employer pays more if you pay more.
Cash in reserve: MoneyHelper's guidance is to keep at least three months' money in reserve before paying off a mortgage early.
Your dependants: If others rely on your income, check what life cover you have before the money goes. How much life insurance do I need?

Paying off part of it

You can do both: pay off part of the mortgage within any overpayment limit and invest or save the rest. Should I overpay my mortgage?

The risks on each side

Investments and your home

The value of investments and any income from them can fall as well as rise and you may get back less than you invest.

Your home may be repossessed if you do not keep up repayments on your mortgage.

A flexible or offset mortgage lets you overpay and draw the money back. On other mortgages, getting it back means applying to borrow again.

Where this fits

Bring your latest mortgage statement and the terms of your current deal, including any early repayment charge.

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The advisers for this subject

Sunny Bharj

Independent Financial Adviser

Tony Springer

Independent Financial Adviser

Advising through Equity & General Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority. Check the firm on the FCA register under number 474163.