Mortgage vs Invest

Pay Down Mortgage or Invest the Difference?

If you have extra cash each month, you face one of the most common personal finance decisions: put it toward your mortgage principal to pay off your home faster, or invest it and let compound growth do the work. The right answer depends on your mortgage interest rate, your expected investment return, your tax situation, and how many years you have left on your loan. This calculator models both scenarios side by side so you can see exactly which strategy leaves you better off and by how much.

Pay Down Mortgage vs. Invest

Should you use extra cash to pay off your mortgage early - or invest it instead?

Your mortgage
Extra monthly paymentThe amount above your regular payment applied directly to principal. Every extra dollar saves that amount times your interest rate in future interest - a guaranteed return equal to your mortgage rate.
Interest rateYour current mortgage rate is your guaranteed return on extra payments. Compare this to your expected after-tax investment return to see which is higher.
Remaining balance $300,000
Interest rate 6.50%
Years remaining 25 yrs
Extra monthly payment $500/mo
Investment
Account typeChoose taxable, tax-deferred (401k/IRA), or Roth. Tax treatment significantly affects the after-tax investment return and therefore which strategy wins.
Annual returnYour expected investment return before tax. The after-tax return is compared against your guaranteed mortgage rate to determine which use of extra cash is more valuable.
Account type
Taxable: dividends taxed yearly; capital gains taxed at sale.
Annual return 7.0%
Dividend yield 1.50%
Capital gains tax 15%
Dividend tax rate 22%

Pay Down Mortgage vs. Invest - Results

Calculating...
Interest saved
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Mortgage-free in
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Portfolio (after-tax)
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Net gain after tax
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Mortgage balance (extra payments)
Portfolio value (after-tax)
Mortgage (no extra)
Disclaimer: Results are estimates for illustrative purposes only and do not constitute financial advice. Tax treatment depends on your individual circumstances and jurisdiction. Investment returns are not guaranteed and past performance does not predict future results. Consult a qualified financial advisor before making mortgage or investment decisions.