When doesn't overpaying your mortgage pay off?

Overpaying a mortgage “earns” its interest rate — about 5.75% a year on a typical variable-rate loan today — risk-free and tax-free. It doesn’t pay when the same money could earn more or is more useful elsewhere: as an emergency fund, to pay off dearer debt or for a big expense. With a PLN 400,000 loan over 20 years, investing beats overpaying if your investments earn over 6.54% a year on average (over 5.75% in an IKE retirement account). Treasury EDO bonds pay less today: 5.10% a year on average after tax, while a 5.75% loan costs 5.90% a year, because interest is charged monthly.

How much does overpaying “earn”?

Every złoty you overpay reduces the principal the bank charges interest on. You no longer pay interest on it for the rest of the loan — and that is your “return”. This “return” equals the mortgage rate, is certain (it doesn’t depend on the stock market) and is untaxed: there is no podatek Belki (the 19% capital gains tax) on interest you don’t pay. For another use of the money to be better, it has to earn more after tax — usually with a risk overpaying doesn’t carry.

All the examples use the loan our calculators show by default: PLN 400,000 to repay over 20 years, an installment of PLN 2,808 and PLN 500 of spare money every month. The rate is 5.75%: the NBP (National Bank of Poland) reference rate (3.75%, in force since March 5, 2026) plus 2 percentage points, which is roughly today’s interest rate on a variable-rate mortgage (WIBOR plus the bank’s margin). The bank charges interest monthly, so over a year such a loan costs 5.90%.

With a variable rate this “return” moves with interest rates: when rates fall, overpaying earns less; when they rise, more.

When is investing better than overpaying?

The overpay-or-invest calculator compares the two paths on the same budget: in both you spend the installment plus PLN 500 every month. When you invest, the loan runs to schedule and PLN 500 goes into a portfolio. When you overpay, that money goes to the loan, which ends earlier, and from then on you invest everything that went to the loan. After 20 years, when the loan is repaid in both cases, we compare your wealth: investments after 19% tax on the gains, paid once, at the end.

At 5.75%, overpaying ends the loan 4 years and 10 months early and saves PLN 74,692 of interest, after which you invest PLN 3,308 a month. This is your wealth after 20 years at three investment returns:

The line is at a return of 6.54% a year: above it investing wins, below it overpaying does.

This break-even return depends mostly on the mortgage rate and on tax. For the same loan at other rates it looks like this:

On a regular account, then, investments have to earn between 0.64 and 0.90 percentage points more than the mortgage rate. Belka tax takes a share of investment gains, while the “return” on overpaying is tax-free. The gap is smaller than 19% of the return because you pay the tax only when you sell, so the whole gain keeps working for years.

An IKE (Indywidualne Konto Emerytalne, a Polish retirement account) is where gains escape Belka tax. In an IKE, with no Belka tax, the break-even return equals the mortgage rate. The calculator adds the return monthly (1/12 of the yearly rate), just as the bank charges interest, so the 5.75% break-even in an IKE is the same 5.90% a year. To pay no tax, though, you have to withdraw from an IKE after age 60 (or 55 if you are entitled to early retirement) and meet the conditions of the act — see our guide “IKE or IKZE?”. The IKE contribution limit for 2026 (PLN 28,260) covers PLN 6,000 a year, but at today’s limit the PLN 39,700 a year you invest after the loan is repaid in the overpaying scenario wouldn’t fit — the rest would go to a regular account, which the calculator doesn’t take into account.

Do treasury bonds earn more than overpaying?

Polish treasury bonds are a safe alternative to overpaying, and the best fit for a comparison with a long loan is EDO — the 10-year inflation-linked bond. In the October 2026 offer it pays 5.35% in the first year, then inflation plus a 2.00% margin. At the latest inflation figure from GUS (Statistics Poland: 4.1% in September 2026), PLN 10,000 grows to PLN 16,440 after 10 years and Belka tax — 5.10% a year on average.

That’s less than the 5.90% a year the 5.75% loan costs: at today’s rates overpaying “earns” 0.81 percentage points more. In an IKE (an IKE-Obligacje account), with no Belka tax, EDO earns 6.03% a year on average — more than the loan costs.

Here you compare like with like, because the risk on both sides is small: the bonds are backed by the State Treasury, and interest you don’t pay is certain. There are two caveats, though. First, both results move: from year 2 the EDO rate depends on inflation, and a variable mortgage rate on interest rates. We take both at today’s level. Second, you can cash bonds in early (for EDO, at PLN 3.00 per bond, never more than the interest accrued), while an overpayment can’t be undone.

Try another horizon or inflation rate in the treasury bonds calculator. We compare EDO with the other bonds in our guide “EDO or COI?”.

When is the money more useful elsewhere?

You have no emergency fund. The bank won’t give an overpayment back — you can only get the money out by selling the flat or borrowing again. A year of overpaying PLN 500 a month is PLN 6,000 you no longer have to hand. Before you start overpaying, put a few months of expenses aside in a savings account or on a deposit. Such a fund earns less than the loan costs: a deposit at the NBP reference rate (3.75%) pays 3.04% after Belka tax, while the loan costs 5.90% a year. On every PLN 10,000 that’s about PLN 287 a year — the price of having the money to hand.

You have dearer debt. If you are also paying off a credit card, an overdraft or a cash loan, check its interest rate. Polish law caps the interest on such debt: the odsetki maksymalne (maximum interest) are twice the odsetki ustawowe (statutory interest: the NBP reference rate plus 3.5 percentage points), which is 14.5% a year today. Fees and commissions can come on top. On PLN 10,000 at 14.5% you pay PLN 1,450 of interest a year, and on the same amount of mortgage at 5.75% — PLN 575. Every złoty you put into paying off such debt “earns” its interest rate, so it usually pays to clear the dearer debts first.

A big expense is coming. A renovation, a car, a deposit for another flat — if you will need a larger sum within a few years, overpaying would lock it away, and a new loan for that expense may cost more than the mortgage. Such money can sit on a deposit or in bonds (we compare them in our guide “Treasury bonds or a bank deposit”). If you still want to overpay, you can choose a lower installment instead of a shorter term and keep more money each month — we compare the two in our guide “Shorten the term or lower the installment?”.

Is overpaying worth it with only a few years left?

An overpaid złoty saves interest only until the loan ends. The less time is left, the shorter it “earns”: still the mortgage rate in percentage terms, but less and less in złoty. In the mortgage overpayment calculator we compared the same loan at the start and 15 years later, when about PLN 146,000 and 60 installments are left. In both cases you overpay PLN 500 a month and shorten the term:

With a few years left, the saving is small and easily loses out to other needs, such as a fund for unexpected expenses. That doesn’t mean investing wins more easily over a short horizon. With 5 years to go, the break-even return on a regular account is 6.93%, higher than with 20 years (6.54%): you pay the tax on the gains sooner, so deferring it helps less.

What does overpaying cost in the first years of a loan?

For contracts signed since July 22, 2017, the prepayment fee is governed by the Polish mortgage credit act (ustawa o kredycie hipotecznym). The bank may charge one only if the contract provides for it. With a variable rate it may do so only within 36 months of signing the contract, and the fee can’t exceed 3% of the amount repaid or the interest the bank would charge on it for a year. On a PLN 10,000 overpayment at 5.75%, that’s at most PLN 300: 3% of the amount is PLN 300, and a year’s interest on it PLN 575. So the fee can take about 52% of the interest the overpayment saves in its first year. After 36 months, overpaying a variable-rate loan is free.

When the rate is fixed for a few years, the bank may claim compensation during that period. In both cases the fee also can’t exceed the bank’s costs directly related to the early repayment. Contracts signed before July 22, 2017 remain under the old rules — the terms of overpaying are in your contract.

If your contract provides for a fee, weigh it against what you would lose by keeping the money on a deposit until month 36 is over. Ask your bank how to submit an overpayment instruction. It is your choice whether an overpayment shortens the term or lowers the installment.

When does overpaying pay, and do you have to choose?

Overpaying is a good choice when:

• you have an emergency fund and no dearer debt;
• the mortgage rate is high compared with what you realistically expect to earn — at 8%, investments on a regular account would have to earn over 8.90% a year on average;
• you keep money beyond your emergency fund on a deposit or savings account — a deposit at the NBP reference rate pays 3.04% after tax today, less than the loan’s 5.90% a year;
• you value a certain result: an overpayment doesn’t lose value in a bad year on the stock market, and the smaller the debt, the less your installment rises when interest rates go up.

You don’t have to pick just one, though: you can put part of your spare money into overpaying and invest the rest. The result then lies between the results of the two options. It is a sensible choice when the return you expect is close to the break-even return and it is hard to tell which will win.

So the order could look like this: an emergency fund first, then paying off dearer debt, and after that overpaying, investing or both — depending on how the return you expect compares with your loan’s break-even return.