Repay the mortgage early or keep money in the account?

The basic sum

The decision comes down to comparing two rates: the cost of the loan (the interest you pay) and the net return, after tax, you can get by investing the same money. If the loan costs more than the money earns, repaying tends to pay off.

What repaying does to the loan

Repaying reduces the outstanding capital. That lowers the monthly interest and, in many cases, shortens the term.

Beyond the numbers

Also weigh the emergency fund — don't leave yourself short of cash to repay —, the repayment fee, and the value you place on owing less. Not everything is a rate.

Worked example

With a loan at 4% and savings earning 2% net (example figures), repaying €10,000 effectively saves more than those €10,000 would have earned invested. If the investment earned above 4%, the sum would flip and keeping the money invested would make sense.

Sources

• Bank Customer Website — How to repay and transfer
• Bank Customer Website — How to renegotiate or repay in advance