Overpaying your mortgage: lower payment or shorter term?
What you save by paying money off your mortgage early, cutting the term or the payment, after the fee, and what that money really earns you.
How much do you save by paying early?
We assume you pay it off today and the interest rate does not change. If your mortgage is variable, enter the rate you pay now.
| Current payment | €832 |
| Interest left if you do not overpay | €49,655 |
| With a shorter term, you finish in | 16 years and 7 months |
| Interest you will pay | €35,055 |
| Saving, after the fee | €14,600 |
| With a lower payment, new payment | €721 |
| Interest you will pay | €43,034 |
| Saving, after the fee | €6,621 |
Maximum fees under Law 5/2019 (mortgages signed from 16/06/2019): variable rate, 0.25% in the first 3 years or 0.15% in the first 5, depending on the contract, and nothing after; fixed rate, 2% in the first 10 years and 1.5% after. Check yours in your deed.
Indicative estimate. Not financial or tax advice.
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The analysis of a flat from start to finish: detailed taxes, a 10-year projection, sale scenarios, sensitivity and the IRR. With these figures:
- IRR over 10 years
- 11.5%
- Monthly cash flow
- €169
- Net yield
- 5.3%
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Shorter term or lower payment
When you overpay you can keep the payment and finish earlier (shorter term) or pay less each month until the same date (lower payment). A shorter term saves more interest, because you pay the loan back sooner; a lower payment leaves you more money free every month from today.
An example: with €150,000 outstanding at 3% and 20 years to go (payment of €832), paying off €20,000 saves €14,600 with a shorter term (you finish 41 months earlier) and €6,621 with a lower payment (you then pay €721).
What overpaying earns you
Every euro you pay early stops being charged your mortgage rate: overpaying is like a risk-free investment that earns the same as your interest rate, minus the fee. With a 2% mortgage it earns little; at 4 or 5%, a lot. If you have an investment that leaves you more after tax, with a risk you accept, investing may beat overpaying.
Overpay or invest in a flat?
Those savings could also be the deposit on a buy-to-let. If the flat leaves you more, on what you put in, than your mortgage rate, your money works harder. But a flat has risks (empty months, unpaid rent, repairs) and cannot be sold in a day. Work out a flat's return or see a full study.
The early repayment fee
Law 5/2019 caps it for mortgages signed from 16 June 2019: with a variable rate, 0.25% of what you pay off in the first 3 years or 0.15% in the first 5 (the contract says which), and nothing after; with a fixed rate, 2% in the first 10 years and 1.5% from then on. Older mortgages keep the terms in their deed.
When to overpay
The sooner the better, because in the first years the payment is almost all interest. But first keep a cushion for emergencies (several months of expenses): money you give the bank does not come back if you need it. And if you have the main-home tax relief of mortgages from before 2013, use up its yearly maximum first.
Reviewed on 10 October 2026
Frequently asked questions
Which is better, a lower payment or a shorter term?
A shorter term saves more interest; a lower payment gives you room every month. If your payment is comfortable, go for the term; if money is tight or you want to invest the difference, the payment.
How much do I save by paying off 10,000 € of my mortgage?
It depends on what you owe and the rate. With €150,000 at 3% and 20 years to go, paying off €10,000 saves about €7,749 with a shorter term and €3,310 with a lower payment. Enter your own numbers above.
How much does the bank charge for early repayment?
For mortgages signed from 16/06/2019, at most: variable rate, 0.25% in the first 3 years or 0.15% in the first 5, and nothing after; fixed rate, 2% in the first 10 years and 1.5% after.
Is it better to overpay the mortgage or to invest?
Overpaying earns your mortgage rate, risk-free. Investing may earn more, but with risk and paying tax on what you make. With cheap mortgages investing usually wins; with expensive ones, overpaying.
When is the best time to overpay a mortgage?
The sooner the better, because at the start the payment is almost all interest. After setting aside a cushion for emergencies, that is.
Indicative estimate. Not financial or tax advice.