How the comparison works
Both paths spend the same amount every month: your regular mortgage payment plus the extra money.
- Pay off the mortgage: the extra goes to principal. Once the loan is gone, the whole amount (old payment + extra) is invested every month until the date the loan would originally have ended.
- Invest: you make the regular payment and invest the extra every month.
On the original payoff date both paths are mortgage-free, so the only difference is the size of the investment account. The calculator compounds monthly and applies your tax rate to investment gains at the end.
The simple rule, and why it's not the whole story
Paying extra on a mortgage earns a guaranteed return equal to your interest rate. Investing only wins if your after-tax return beats that rate. With no taxes, the break-even return is exactly your mortgage rate. Taxes on gains push it higher.
A few things the math doesn't capture:
- Risk. The mortgage return is certain; market returns aren't. A 6% average can include years of −20%.
- Liquidity. Money in your home is hard to get back out without selling or borrowing. Money in an account is available.
- Employer match. If your 401(k) offers a match you aren't getting, that usually beats both options.
- High-interest debt. Paying off credit cards first almost always wins.
- Mortgage interest deduction. It only helps if you itemize, which most homeowners don't since the standard deduction rose. It isn't included here.
- Peace of mind. Owning your home outright has value that doesn't show up in a spreadsheet.
Example
Say you owe $300,000 at 6.5% with 25 years left (a $2,026 monthly payment) and have an extra $500 a month. Putting it toward the mortgage pays the loan off about 9 years early and saves about $125,600 in interest. Investing the $500 instead at 6% a year, with 15% tax on gains, leaves you about $34,900 behind the prepay path after 25 years. You'd need a steady return above roughly 7% for investing to win.
Frequently asked questions
Is it better to pay off my mortgage early or invest?
It depends on your mortgage rate versus the after-tax return you expect from investing. Paying extra earns a guaranteed return equal to your rate; investing earns more only if returns beat that rate, and with more risk. This calculator shows the break-even return for your numbers.
What return do I need for investing to win?
With no taxes on gains, you need an average return above your mortgage rate. Taxes on gains raise that bar a little. The calculator solves for the exact break-even.
Should I invest before paying extra on my mortgage?
Common priorities: get any 401(k) employer match first, pay off high-interest debt, keep an emergency fund, then choose between extra mortgage payments and investing based on your rate, risk tolerance and goals.
Does paying extra lower my monthly payment?
No. Extra principal shortens the loan, but the required payment stays the same unless you recast the mortgage.
Is the mortgage interest deduction included?
No. It only helps if you itemize deductions, and most homeowners take the standard deduction. If you do itemize, your effective mortgage rate is a bit lower than the stated rate.
Estimates only, using a constant return. Real investment returns vary and can be negative. Does not include the mortgage interest deduction, PMI, inflation, or account fees beyond what you enter. Not financial advice. Last updated September 29, 2026.