Overpaying your mortgage: what it saves, and when to invest instead

Overpaying a variable-rate mortgage is fee-free and earns your mortgage rate, tax-free. Compare that with savings and investments after tax.

Every euro you pay off a mortgage early stops costing interest for the rest of the term. That makes an overpayment worth your mortgage rate, with no tax to pay on the saving.

Is there a fee?

Not on a variable rate. Section 121 of the Consumer Credit Act 1995 lets you pay off all or part of a home loan at any time with no fee. This doesn't apply if the rate is fixed. On a fixed rate, check your loan terms before overpaying. Your lender must have given you a worked example of the early repayment charge when you fixed.

What it saves

A €320,000 mortgage over 30 years at 4%, with €200 a month extra from the start:

The loan is cleared in 24 years and 1 month instead of 30 years.

Shorter term or lower repayment?

In the example, the overpayments shorten the term. Ask your lender whether an overpayment will shorten the term or lower your monthly repayment. A shorter term saves more interest; a lower repayment gives you more room each month.

Compared with saving or investing

• deposit interest is taxed at 33% DIRT (the tax on savings interest). A 2.5% deposit rate is worth 1.675% after tax, against a mortgage rate of 4%
• Irish and EU funds and ETFs pay exit tax on gains (38%, falling to 35% once Finance (No. 2) Bill 2026 is enacted). Shares pay Capital Gains Tax. Returns are not guaranteed; an overpayment's return is
• pension contributions get income tax relief at your highest rate, which may beat both

Before you overpay

• keep an emergency fund: money paid into a mortgage is hard to get back out
• clear dearer debts first, such as credit cards and car loans
• if your lender prices by loan-to-value bands, overpaying may move you into a cheaper band; your annual statement says whether you can move

Work it out

• Overpay the mortgage or invest? →
• Mortgage repayments and amortisation →

Sources

• Revenue: What DIRT rate is applicable? (33%) (checked 25/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.