Mortgages
Pay Off Mortgage Early or Invest Calculator
Paying down a mortgage earns you its interest rate, guaranteed and risk-free. Investing might earn more, but might not. The comparison is not return against return — it is a certain return against an uncertain one, and the gap has to be wide enough to be worth the risk.
0 if the money goes into a Roth or other untaxed account.
Investing comes out ahead by
$304,866
If the market delivers the return you assumed, which it will not do evenly.
The two paths are close enough that the assumed return decides the answer — and that assumption is the least reliable input here. When it is this tight, the tiebreaker is usually temperament rather than arithmetic.
- Interest saved by paying down
- $179,759
- Months off the mortgage
- 12 years 7 months
- Investment value after tax
- $665,125
- Of which growth
- $570,148
- Tax on that growth
- $85,522
- Return needed to match paying down
- 7.65%
Pre-tax, because the mortgage saving is not taxed.
How this calculator works
The mortgage is amortised twice — with and without the extra payment — and the difference in total interest is the guaranteed saving. The same extra amount is then compounded monthly at the investment return over the months the mortgage would otherwise have run, with capital gains tax applied to the growth only. The advantage is the after-tax investment value less contributions, minus the interest saved.
A constant investment return is assumed, which no market delivers; real sequences matter enormously when contributions are monthly. The mortgage interest deduction, PMI removal, and the option value of liquidity are not modelled, and investing is assumed to actually happen every month rather than in intention only.
Try an example
Frequently asked questions
Should I pay off my mortgage early or invest?
Compare the mortgage rate against your expected return after tax. At 3% the market usually wins; at 7% or more the guaranteed saving is hard to beat. In between it is close enough that liquidity, risk tolerance and how much the debt weighs on you matter more than the arithmetic.
Why does the mortgage rate count as a guaranteed return?
A dollar of principal paid early removes every future interest charge that dollar would have generated, at exactly the mortgage rate. Nothing about it is uncertain. An 8% expected market return is an average across decades that includes years of −30%.
Does the mortgage interest deduction change this?
For most people it no longer does. Since the 2017 standard deduction increase, roughly nine in ten filers do not itemise, so mortgage interest gives them no tax benefit at all. If you do itemise, your effective rate is lower than the note rate, which tilts the answer toward investing.
What should I do before either one?
Capture the full employer 401(k) match, since that is an instant 50–100% return. Clear any debt above the mortgage rate — credit cards especially. Build an emergency fund, because home equity is not spendable. Only then does this comparison become the live question.
Is there a middle path?
Splitting the extra payment is entirely reasonable and is what many people actually do. It gives up some expected return for a shorter loan and a sleep-at-night benefit that no calculator can price. There is no rule that the answer must be all one thing.
Related calculators
Mortgage Payoff Calculator
See how much faster you'd pay off your mortgage — and how much interest you'd save — by adding a little extra to your payment each month.
Biweekly Mortgage Calculator
See how paying half your mortgage every two weeks pays the loan off years early and saves thousands in interest — the biweekly payment trick, quantified.
Investment Calculator
Project an investment portfolio's growth with monthly contributions — final value, your money vs market growth, and the year-by-year path.
Debt Payoff Calculator — Snowball vs Avalanche
Enter up to three debts and compare the snowball and avalanche strategies head-to-head: payoff dates, total interest, and what the difference costs.
Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.