Pay Down Mortgage or Invest

Should extra cash go to your mortgage or into investments? Compare net worth, interest saved and the payoff date for both paths.

Questions this answers

  • Should I pay off my mortgage early or invest?
  • How much interest will extra payments save?
  • When does investing beat prepaying?
  • How soon could I be mortgage-free?
  • What return do I need for investing to win?
Calculator Learn FAQs
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%
Calculating...
Interest saved
-
Mortgage-free in
-
Portfolio (after-tax)
-
Net gain after tax
-
Mortgage balance (extra payments)
Portfolio value (after-tax)
Mortgage (no extra)
What this compares: two ways to use the same monthly cash over the same years. Path 1 invests the extra cash and pays the mortgage on schedule. Path 2 puts the extra cash on the mortgage, then invests the whole freed-up payment (regular payment plus extra) once the loan is gone. The verdict compares the after-tax portfolio each path has at the end; the mortgage is paid off in both by then.
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.

Companion pieces

Go deeper on Mortgage vs Invest

Quizzes, guides and answers built to go with this calculator.

Quiz

How Much Do You Know About Paying Down a Mortgage vs. Investing?

8 questions, 4 min

Eight questions on guaranteed returns, risk and liquidity.

Take the quiz

Learn

Articles 1

Quizzes 1

Frequently asked questions

Is it better to pay off the mortgage or invest?

It depends mainly on your mortgage rate versus your expected investment return after tax. Prepaying earns a guaranteed return equal to your mortgage rate. Investing may earn more over long periods but with ups and downs. With a low rate, investing often wins; with a high rate, prepaying looks better.

How does the calculator compare the two paths?

Both paths spend the same extra cash each month. In one it goes to principal; in the other it is invested. Once the prepaid mortgage is gone, the freed-up payment is invested too. The chart compares net worth, home equity plus investments, over time.

Does it include the mortgage interest deduction?

No. It ignores the deduction, which most households no longer benefit from because they take the standard deduction. If you itemize, your effective mortgage rate is a little lower, which slightly favors investing.

What about risk?

Paying down the mortgage is a sure return; investing is not. Many people split extra cash between the two, and it is wise to have an emergency fund and capture any 401(k) match before prepaying a mortgage.

Can I save my scenario?

Yes. Save keeps your inputs in this browser on this device, with no account needed.

Quick check

Test what you know

8 questions, about 4 minutes, instant results and no sign-up.