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Overpay mortgage or invest? Ireland calculator 2026
Overpay my mortgage, invest, or top up my pension, after Irish tax? Overpaying earns your mortgage rate, tax-free and certain; an ETF pays exit tax and deemed disposal every 8 years; shares pay 31% CGT; a pension gets tax relief but is locked away. Example: €10,000 on a €300,000 mortgage at 4% with 25 years left takes 1 year 4 months off the term and saves €16,434 of interest. At year 10 it leaves you €14,908 better off, against €13,976 in an ETF and €14,733 in shares at 5% growth, or €23,076 in a pension at 40% relief (locked until 60). An ETF needs about 5.94% a year to match overpaying.
Most left for you, after tax
Each choice, in detail
| Choice | Better off at the end | Tax | Access |
|---|---|---|---|
| Overpay the mortgage1 yr 4 mo off the term, €16,434 less interest over the loan; a tax-free return equal to your 4% rate | €14,908 | €0 | Money is in the house; getting it back means borrowing again |
| ETF or fundExit tax 38% in 2026, 35% from 2027, with the 8-year deemed disposal paid from the fund and credited on sale | €13,976 | €2,312 | Sell any day; value can fall |
| Shares or investment trust31% CGT on the gain above the €1,270 annual exemption, sold in one year; growth only, no dividends | €14,733 | €1,556 | Sell any day; value can fall |
| Pension (AVC or PRSA)€10,000 of your money buys €16,667 of pension after 40% relief; 25% tax-free lump sum, the rest taxed at 20% (USC also applies when drawn) | €23,076 | €4,072 | Locked until 60: you could not draw it at year 10 |
"Better off at the end" is what each choice adds to your wealth at the date you chose, after tax, against making no extra payment: the mortgage you no longer owe plus any freed payments saved, or what the investment or pension pays out after tax. The same money goes into every choice. Overpaying gives a tax-free return equal to your mortgage rate. The pension figure counts income tax on drawdown at your retirement rate; USC also applies, so treat it as an upper estimate. Contributions above your age-related limit get no relief here.
How it is worked out
- Overpay: standard monthly amortisation. Keep the payment and the loan ends sooner; reduce the payment and it is recalculated over the years left. Once the loan is cleared (or the payment falls), the money it no longer needs is saved at your deposit rate less 33% DIRT.
- ETF or fund: exit tax on the gain (38% in 2026, 35% from 2027). Every 8 years each purchase is taxed as if sold; here that tax is paid by selling units, and credited when you finally sell.
- Shares or an investment trust: CGT at 31% on the gain above €1,270, all sold in one year. Growth only, no dividends.
- Pension (AVC or PRSA): relief at your rate within the age-related limit, so more goes in than it costs you. At the end, 25% tax-free and the rest taxed at your retirement rate. Locked until you can draw it.
- Break-even: the growth a year at which each investment leaves exactly what overpaying does.
Not just money
- Access: an ETF or shares can be sold any day; money in the house comes back only by borrowing again; a pension is locked until retirement.
- Risk: the overpayment return is certain at your rate while it stays the same; market returns are not, and can be negative.
- Mortgage-free sooner: some people value the lower fixed cost and the earlier end date for its own sake.
- Fixed rates: overpaying a fixed-rate mortgage can bring charges or limits; check with your lender first (CCPC).
Frequently asked questions
Should I overpay and shorten the term, or reduce my monthly payment?
Keeping the payment the same and shortening the term usually saves more interest, as the CCPC notes. On a €300,000 mortgage at 4% with 25 years left, a €10,000 lump sum with the payment kept at €1,583.51 takes 1 year 4 months off the term and saves €16,434 of interest. Reducing the payment instead cuts it to €1,530.73 a month and saves €5,835 of interest over the loan.
Is it better to overpay the mortgage or invest in ETFs in Ireland?
It depends on the growth you assume. Overpaying earns your mortgage rate, tax-free and certain. An Irish or EU ETF pays exit tax (38% in 2026, 35% from 2027) on the gain, and every 8 years you pay it even if you do not sell (deemed disposal), with credit when you finally sell. In the example (4% mortgage, 10 years) an ETF needs about 5.94% a year after charges just to match overpaying. Shares or an investment trust, taxed under CGT at 31% with the €1,270 annual exemption, need about 5.16%.
AVC or overpay the mortgage?
Pension relief at your marginal rate means €10,000 of your money buys €16,667 of pension at 40%, within your age-related limit (25% of earnings in your 40s, up to €115,000 of earnings). Up to 25% comes back tax-free when you retire (within the €200,000 lifetime limit) and the rest is taxed as income. In the example the pension leaves €23,076 against €14,908 for overpaying at year 10, but it is locked until you can draw it, usually years after the mortgage decision matters.
What growth rate do I need to beat overpaying my mortgage?
The calculator works it out from your figures: the growth a year, after fund charges, at which each investment leaves the same after tax as overpaying. For a 4% mortgage over 10 years: about 5.94% for an ETF, 5.16% for shares under CGT and 0.51% for a pension at 40% relief taxed at 20% in retirement.
Are there penalties for overpaying a fixed-rate mortgage in Ireland?
They can be significant. The CCPC says variable-rate mortgages usually allow overpayments without penalties, while fixed-rate mortgages may charge fees or limit how much you can overpay; some lenders allow a set percentage of the balance each year without a charge. Check your lender’s terms and any charge before you overpay on a fixed rate.
Is overpaying the mortgage a tax-free return?
Yes. Every euro you overpay stops interest at your mortgage rate, and there is no tax on interest you do not pay: no DIRT, no exit tax, no CGT. So a 4% mortgage is like a 4% tax-free, risk-free return, which is why the comparison only tips to investing when expected growth after tax beats that rate.
Related
- Where should my money go? State Savings, deposits after DIRT, ETFs, shares and a pension compared after tax.
- Pension tax relief calculator: your exact relief and the room left this year.
- ETF exit tax calculator · CGT calculator · Irish investment tax after Budget 2027
- Run an Irish money blog or newsletter? Put this calculator on your site for free.
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