Overpay the mortgage or fund the portfolio?
Both paths run to the same date and are measured by net worth — including tax on capital gains and what frees up once the loan is gone.
The model keeps the interest rate constant. Overpayment limits, the end of the fixed-rate period and prepayment penalties are not modelled.
Invest is ahead by €29,844.00 after 20 years.
From a gross return of 4.5%, investing comes out ahead in the model.
Advantage
€29,844.00
Break-even return
4.5%
Debt-free earlier by
8.6 years
Repay
- Portfolio after tax
- €4,045.58
- Remaining debt
- €0.00
- Net worth
- €4,045.58
- Debt-free after
- 19.8 years
Invest
- Portfolio after tax
- €137,442.74
- Remaining debt
- €103,553.17
- Net worth
- €33,889.57
- Debt-free after
- 28.4 years
| Path | Portfolio after tax | Remaining debt | Net worth | Debt-free after |
|---|---|---|---|---|
| Repay | €4,045.58 | €0.00 | €4,045.58 | 19.8 years |
| Invest | €137,442.74 | €103,553.17 | €33,889.57 | 28.4 years |
The investing path incurs €14,818.17 of tax on capital gains. Repaying faster saves €35,582.31 of interest over the period — tax-free.
What does this mean for your real wealth?
The calculation above compares both routes for one loan. In Planafolio's financial plan, remaining debt, instalment and portfolio together feed into how much of your retirement needs your wealth covers.
Play through repay-or-invest in a financial planWhat does the result mean?
The result shows whether a special repayment or investing leads to more net worth at the cut-off date in the model – and at what return the picture flips.
Model assumptions
- The loan rate stays the same for the whole period: no end of the fixed-rate term, no limits on special repayments, no early-repayment penalty.
- The return stays constant for the whole period. Real markets fluctuate; losing years are not part of the model.
- In the model, tax is due once at the end on the investment gain (with partial exemption); the saver's allowance and advance lump sum are not included.
- Fund costs, order fees and spreads are not deducted.
- All amounts are nominal. Purchasing power falls with inflation, which the result does not reflect.
How the calculator works
Both paths are simulated month by month: loan interest on the outstanding balance, the investment at the assumed return. Once the loan is repaid, the freed-up instalment is invested; at the end, tax on the investment gain is deducted.
More on the methodologyWorked example
Example: extra repayment or ETF savings plan?
The calculator's default values above: a running loan and an extra monthly amount that goes either into repayment or into an equity ETF. Both paths run to the same cut-off date.
Inputs
- Outstanding balance€250,000
- Annual loan interest rate3.8%
- Monthly payment (interest and principal)€1,200
- Extra per month€300
- Annual ETF return (assumption)7%
- Comparison period20 years
Calculation
| Net worth at the cut-off date if you repay faster | €4,046 |
|---|---|
| Net worth at the cut-off date if you invest | €33,890 |
| Debt-free earlier thanks to extra repayment | 103 months |
| Loan interest saved until the cut-off date | €35,582 |
Result
| Lead for investing | €29,844 |
|---|
Both paths are level at a return of about 4.53% per year: above that, investing is ahead, below it, repaying. The saved loan interest is certain, the return is not.
The 7% annual return is an assumption, the same default as in the calculator above, not a forecast. Gains are taxed at a flat rate after partial exemption at the cut-off date; the loan rate applies for the whole period.
Common mistakes
Comparing an uncertain return with a certain interest rate
The loan interest is a certain saving, the return on an investment merely an assumption. If the break-even return is close to your expectation, the result depends heavily on that assumption.
Overlooking fixed-rate period and prepayment limits
In the model the loan rate stays constant. End of the fixed-rate period, prepayment caps and early repayment penalties are not modelled, yet can be decisive.
Forgetting tax on the investment gain
The model deducts tax on the gain once at the end (26.375% including solidarity surcharge, with partial exemption). Saver's allowance and advance lump sum are missing.
Sources and status
Content reviewed on September 29, 2026. Legal status: 2026. The sources are official German legal texts and data and are therefore in German.
The calculation is a simplified estimate and does not replace tax advice.
What can I do?
Compare the break-even return with your expected return – the smaller the gap, the more the result depends on that assumption.
Why comparing percentages misleads
Return above interest rate is not a complete answer
Three effects flip the result once you actually calculate it.
Saved interest is tax-free
Interest you avoid is a certain after-tax return. Capital gains are taxed at 26.375%, so the gross return has to sit noticeably above the loan rate just to keep up.
Different bases
Loan interest applies to a shrinking balance, investment return to a growing portfolio. Comparing only the percentages compares two different amounts.
Certainty has value
The interest saving is guaranteed, the return is not. If your budget is tight or your fixed-rate period ends soon, repaying buys planning certainty that no pure number comparison shows.
Frequently asked
Repaying versus investing
Roughly once the expected after-tax return exceeds the loan rate. With 26.375% German capital gains tax and a 30% partial exemption on an equity ETF, the gross return has to be a good fifth (about 23%) above the loan rate — the effective tax on the gain is then about 18.5%. The calculator shows the exact figure for your numbers.
That is in your loan agreement — 5% of the original loan amount per year is common, some banks allow 10% or negotiate later. Without an agreed right the bank can charge a prepayment penalty.
If your fixed rate expires in a few years, the balance at that point is what matters: the smaller it is, the less a higher follow-up rate hurts. This calculator assumes a constant rate and therefore leaves that risk out.
A common mix: part of the spare money into overpayments, the rest into the portfolio. Set the extra amount to half to see how the result shifts.
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