Invest or overpay the mortgage

Both paths start with the same balance and the same required payment, and both spend the same discretionary surplus every month. In the overpaying path the surplus reduces the principal directly; in the investing path it buys fund units. Once a mortgage is cleared — early in one path, on schedule in the other — the freed monthly payment is redirected into the portfolio in both, so neither path is left holding idle cash. Net wealth is plotted as portfolio minus the remaining balance. The break-even figure is found by bisecting the return between zero and twenty percent until the two paths finish level, and it is reported as absent when no rate in that range separates them.

Interest relief is applied as a permanent reduction in the effective rate, which is the Dutch hypotheekrenteaftrek treated as a rate cut rather than as an annual refund with its own thresholds and its own eigenwoningforfait offset. Mortgage interest accrues at a simple monthly rate while the portfolio compounds geometrically, matching how the two products actually work. Tax on the portfolio is not modelled, and in a country that taxes holdings annually it favours the debt side. The certainty of the guaranteed return is not priced at all.

Why is the break-even return not simply the mortgage rate?

Because interest relief lowers the rate you are actually paying, and because the two paths do not hold the same amount of money at the same times. Overpaying frees the monthly payment earlier, which then compounds in the portfolio for longer, so the overpaying path is not purely a debt strategy — it becomes an investing strategy with a delayed start. The bisection finds the return at which those two effects cancel, which is generally below the headline rate and above the relieved one.

Does it account for the certainty of paying off debt?

No, and that is the largest thing missing from the comparison. Repaying at a known rate is risk-free in a way that an expected equity return is not, and a plan that is correct on average can still be the wrong one for a household that would be forced to sell during a downturn. The break-even return tells you what the market has to deliver; it cannot tell you what that uncertainty is worth to you.

Is the tax relief figure specific to the Netherlands?

The mechanism is: hypotheekrenteaftrek lets Dutch owner-occupiers deduct mortgage interest, at a rate that has been capped and stepped down over successive years. The slider is left free rather than fixed so the page still works elsewhere — set it to zero and you have a comparison with no relief at all, which is the right setting for most other jurisdictions.

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