Pay off the mortgage, or invest the money?

Both plans spend the same amount of cash every month. The difference is only where it goes — into the loan, or into the market. Whatever a plan does not send to the lender is invested, so the two are compared on equal footing.

How to read this calculator

Difference after 20 years

—

Pay down mortgage

—

Invest instead

—

Interest saved

—

Break-even return

—

Mortgage

Original loan amount

Interest rate

Term

Years already paid

Early payoff plan

A — Pay the whole balance at once
One lump sum wipes out the loan. B — Extra amount every month
Chips the balance down faster each month.

Extra payment as

Amount / month

Investment

Effective annual return

Years

Match the years to the mortgage payoff date

Tax on investment gains, paid at the end

Break-even return by year

Mortgage balance

Investment value

Mortgage paid down earlyGroup

Year	Paid	Interest	Principal	Balance	Net worth

Annual investment projectionGroup

Year	Invested	Growth	Value	Mortgage	Net worth

Annual net worth

Return sensitivitySteps%

Mortgage rate × investment returnSteps%

Investing aheadPrepayment ahead

What this model assumes

Both plans commit the same cash each month, and once a plan’s mortgage is gone the freed-up payment is invested from then on. That symmetry is what makes the comparison fair.
The market returns a constant percentage every year. Real returns are not constant, and a poor decade early on hurts far more than this model shows.
Paying principal early avoids future contractual interest at the loan rate under this model. That saving is more predictable than a market return, but taxes, deductions, prepayment terms, and the loss of liquid cash can change its economic value. Equal percentages are not equal risk.
Tax on gains is applied once, at the end of the period, to growth only.
Not modelled: property taxes and insurance, PMI removal, the mortgage-interest deduction, employer matching, inflation, fees, refinancing, and prepayment penalties.

Calculations are estimates based on your assumptions and are not financial or investment advice. Actual results may differ. Read the financial disclaimer.