Pay down the mortgage, or invest the money?
Extra principal earns your mortgage rate with certainty. Investing the same money only comes out ahead if it earns more than that rate, and markets can fall. This calculator puts both choices on the same timeline so you can see the trade-off.
Pay down the mortgage, or invest?
Put a lump sum toward the mortgage and keep the same payment, or invest it. Compare both on the loan’s original payoff date.
The example, step by step.
The situation
- $300,000 remaining at a 6% fixed rate with 300 months left ($1,932.90 a month)
- A $100,000 lump sum
- An expected 7% yearly return if invested, after taxes and fees
What the calculator finds
- Prepaying while keeping the same payment pays the loan off in 147 months, 153 months sooner, and saves $197,554 of interest.
- Investing instead ends about $70,289 ahead on the original payoff date ($542,740 versus $472,452), because 7% beats the break-even return of 6.17%.
- The break-even return is the mortgage rate compounded monthly: (1 + 0.06 ÷ 12)¹² − 1 ≈ 6.17% a year.
Prepaying earns your mortgage rate with certainty. Investing only comes out ahead if the money earns more than that rate, and markets can fall.
What goes in.
What comes out.
Enter the balance, fixed rate and months remaining. Leave the monthly payment blank to use the scheduled principal and interest, or enter a higher payment if you already pay extra.
In the prepay path, the lump sum goes to principal and you keep the same payment until the loan is paid off; after that the payment is invested. In the invest path, the lump sum is invested and the loan runs on schedule.
Both paths spend the same amount every month and are compared on the loan’s original payoff date, in nominal dollars.
What it does not cover.
- The investment return is an assumption, not a promise. A guaranteed rate and a risky return are not equivalent.
- Enter a return after investment taxes and fees. The mortgage interest deduction, mortgage insurance and refinancing are not modeled.
- Home equity is harder to reach than investments in an emergency, so keep an emergency fund first.
Questions
What return do I need for investing to beat paying off my mortgage?
More than your mortgage rate compounded monthly. For a 6% mortgage that is about 6.17% a year after taxes and fees. The calculator shows this break-even return for your loan.
Does it assume I keep making the same payment?
Yes. Both paths budget the same monthly amount until the original payoff date. Once the prepaid loan is gone, that payment is invested, which keeps the comparison fair.
Is paying off a mortgage early a good idea?
It depends on your rate, other debts, emergency savings and how much investment risk you can accept. This illustration compares the arithmetic of one lump sum; it is not a recommendation.
See the decision inside a full plan.
Explore retirement cash flow, compare scenarios and review the assumptions in a free Amicus sample plan.