Is Early Mortgage Repayment a Good Idea?

Having extra savings often leads to a classic financial dilemma: Should I use it to pay down my mortgage or is it better to invest it? And if I decide to prepay, is it better to reduce the monthly payment or the loan term?

In this 2025 guide, we analyze the keys to making the best financial decision.

What is Early Repayment?

Early repayment (or prepayment) consists of paying back the bank part (partial) or all (total) of the outstanding debt before the agreed term ends. By doing so, you reduce the outstanding principal on which interest is calculated, which always generates savings.

Option A: Reduce Term (The Saver's Choice)

When choosing to reduce the term, you keep the same monthly payment you currently pay, but you finish paying off the mortgage sooner.

• Advantage: The interest savings are maximum. By shortening the time the bank lends you money, the total interest plummets.
• Best for: People who are comfortable with their current payment and want to be debt-free as soon as possible.

Example: If you have 20 years left and prepay €10,000 to reduce the term, you could save €5,000 in interest and finish 2 years earlier (estimated figures).

Option B: Reduce Payment (The Peace of Mind Choice)

When choosing to reduce the payment, you keep the same mortgage end date, but you pay less each month.

• Advantage: You get more immediate monthly liquidity. Your household budget relaxes.
• Disadvantage: Interest savings are lower than reducing the term, as you still owe money for the same amount of time (even if you owe less).
• Best for: Families who are tight at the end of the month or anticipate a rise in interest rates.

When should you NOT prepay?

1. If your interest rate is very low: If you signed a fixed-rate mortgage at 1% years ago, and today savings accounts or Treasury Bills pay 3% or 4%, do not prepay. You make more money investing those savings.
2. If you need liquidity: Do not deplete your savings entirely. Always keep an emergency fund.
3. If there are fees: Check if your contract has prepayment penalties (although these are often limited by law in many regions).

Simulate your ideal scenario

The best way to decide is with real numbers.

Use our Amortization Calculator to simulate both scenarios ("What happens if I contribute €5,000?"). Our tool will tell you exactly how much interest you save in each case.

Take control of your financial future today!