Extra mortgage payment vs invest: the decision in numbers
Extra mortgage payment vs investing: compare guaranteed interest savings, uncertain returns, taxes, fees and access to cash using the same time horizon.
The comparison is not 4% versus 6%
Suppose you have €300 left each month. Your mortgage balance is €250,000, the rate is 4%, and the scheduled payment is €1,400. You could send the €300 to the lender or invest it. Looking only at 4% versus an assumed 6% makes investing appear to win. That shortcut ignores taxes, fees, volatility, liquidity and the fact that mortgage interest avoided is certain while an investment return is not.
The useful question is: which job does this €300 need to do for your household? Reduce a guaranteed liability, build accessible reserves, or take market risk for a longer-term goal?
What the mortgage route guarantees
Using SaveMate's mortgage engine, €250,000 at 4% with a €1,400 payment takes 272 months to repay and costs €130,504.79 in interest. Adding €300 every month cuts the term to 203 months. That is 69 months earlier and €36,329.90 less interest.
This is not a 4% investment return quoted on an account statement. It is an expense you no longer incur. The result is dependable only if your contract allows the extra payment on the assumed terms. EU mortgage borrowers generally have a right to repay early, but national rules and the contract may permit compensation or impose conditions. Check the early-repayment section and ask the lender for a written calculation before acting.
What the investment route might produce
Investing €300 monthly for 20 years at a constant assumed 6% annual return, compounded monthly, produces €138,612.27 in the SaveMate engine. Contributions are €72,000; the remaining €66,612.27 is modelled growth.
That figure is a scenario, not a promise. Real returns arrive unevenly. Fees and taxes may reduce what you keep, and a market fall can coincide with the moment you need the money. A fair comparison therefore uses an after-cost, after-tax expected return and tests a weaker outcome as well as the headline case.
Liquidity can decide before return does
Money paid into a mortgage becomes home equity. It may improve your balance sheet, but it is not the same as cash in an accessible account. Recovering it may require refinancing or selling, neither of which is guaranteed when income falls.
If you do not yet have an emergency buffer, directing every spare euro to the mortgage or the market leaves the same practical weakness: an unexpected bill can send you back to expensive borrowing. Build the buffer first, then compare the two long-term uses of genuinely spare cash.
A decision rule that survives uncertainty
Choose extra payments first when the mortgage rate is high relative to a conservative after-cost return, you value a fixed payoff date, or investment losses would make you abandon the plan. Choose investing first when the horizon is long, the mortgage is comfortably affordable, liquidity is already covered, and you can tolerate a substantial temporary fall without selling.
You do not have to make it binary. Splitting €300, for example €150 to the mortgage and €150 to investing, buys some certainty and some market exposure. It will not maximise either optimistic outcome, but a plan you can maintain is often more useful than a mathematically pure plan you later reverse.
Compare with the same assumptions
Run the extra mortgage payment calculator with your contractual rate, payment and permitted extra-payment pattern. Then run the compound-interest calculator for the same monthly amount and time period. Record fees, taxes and a lower return scenario beside the result. The gap between those cases, together with your need for liquidity, should drive the decision instead of a simple comparison of two percentages.