Pay Down Mortgage vs. Invest

Should you use extra cash to pay off your mortgage early, or invest it instead? This tool compares the guaranteed interest you save by paying down your loan against the projected after-tax value of investing the same money.

Your mortgage

Remaining balanceHow much you still owe on your mortgage today. This is the principal that extra payments chip away at.

Interest rateYour current mortgage rate is your guaranteed return on extra payments. Compare it to your expected after-tax investment return to see which is higher.

Extra monthly paymentThe amount above your regular payment applied directly to principal. Every extra dollar saves future interest at your mortgage rate, a guaranteed return.

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. How your account is taxed strongly affects the after-tax return, and therefore which strategy wins.

Annual returnYour expected investment return before tax. The after-tax version of this is compared against your guaranteed mortgage rate.

Dividend & capital gains taxFor taxable accounts only. Dividends are taxed each year; gains are taxed when you sell. Higher taxes lower your real investment return.

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%

Withdrawal tax 22%

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)

What this compares: the value of the extra cash only. It weighs the interest you'd save by paying down the mortgage against the after-tax value of investing that same money. It does not reinvest the regular mortgage payment that frees up once the loan is paid off early. If you would invest that freed-up payment, paying down looks more favorable than shown here.

This calculator is for educational and informational purposes only. Results are estimates based on the inputs you provide and should not be taken as professional advice. Tax treatment depends on your individual circumstances and jurisdiction, and investment returns are not guaranteed. Always consult a qualified professional for decisions involving investments, taxes, or financial planning.