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Pay off mortgage or invest calculator
Same extra money each month, two routes. Route A: throw it at the mortgage, then invest everything once the house is paid off. Route B: invest it from day one.
A · Prepay first
Mortgage gone in 16 yrs 11 mo. Net worth from this money after 28 years:
$489,449
Investments $489,449
B · Invest the extra
Mortgage runs its full 28 yrs. Net worth from this money after 28 years:
$519,344
Investments $519,344
At a 7% return vs a 6.5% mortgage, investing comes out $29,895 ahead, if that return actually arrives every year.
What the calculator compares
Both routes spend exactly the same money each month: your scheduled payment plus the extra. Route A sends the extra to principal; once the mortgage is gone, the whole amount goes into investments. Route B pays the normal schedule and invests the extra from the start, then adds the freed-up payment when the loan ends. At the comparison date, we subtract any mortgage still owed from the investment balance.
What the numbers leave out
- Risk. Prepaying earns exactly your mortgage rate with certainty. Market returns can be negative for years at a time.
- Liquidity. Home equity is hard to reach without selling or borrowing; investments can be sold.
- Taxes. The mortgage interest deduction (if you itemize) and investment taxes both shift the comparison.
- Peace of mind. Owning your home outright lowers your fixed costs, which matters a lot in retirement or a job loss.
Try a return equal to your mortgage rate: the two routes land almost level. The whole question comes down to whether you believe you'll beat your mortgage rate after tax and whether you can stomach the swings along the way.
Questions people ask
Is it better to pay off my mortgage or invest?
On paper, investing wins when your expected after-tax return is higher than your mortgage rate. But mortgage prepayment is a guaranteed return, while market returns vary year to year. Many people split the difference.
What return should I assume for investing?
Broad US stock market index funds have historically returned around 10% a year before inflation over long periods, but with big swings and no guarantee. Using 6–7% is a common conservative planning assumption. Bonds and savings earn less.
Does this account for taxes?
No. If you itemize and deduct mortgage interest, your effective mortgage rate is lower; if you invest in a taxable account, your effective return is lower. Adjust the rates you enter to reflect your situation.
What should I do before either one?
Common guidance is to capture any employer 401(k) match, build an emergency fund, and clear high-interest debt like credit cards first. Mortgage vs investing comes after those.