Pay Off Mortgage or Invest Calculator
Compare two paths for your extra money: pay down your mortgage faster or invest it. See net worth after your remaining term, the break-even return, and after-tax analysis — then make the choice that fits your goals.
Both paths start with $500/mo extra. "Invest" keeps normal payments + invests extra. "Pay Off" adds extra to mortgage, then invests freed payment.
| Year | Invest: Portfolio | Invest: Mortgage Balance | Invest: Net Worth | Pay Off: Net Worth |
|---|---|---|---|---|
| 1 | $6,232 | $275,549 | -$269,317 | $0 |
| 2 | $12,915 | $270,789 | -$257,873 | $0 |
| 3 | $20,082 | $265,697 | -$245,615 | $0 |
| 4 | $27,766 | $260,250 | -$232,485 | $0 |
| 5 | $36,005 | $254,424 | -$218,419 | $0 |
| 6 | $44,841 | $248,193 | -$203,353 | $0 |
| 7 | $54,314 | $241,528 | -$187,213 | $0 |
| 8 | $64,473 | $234,398 | -$169,925 | $0 |
| 9 | $75,367 | $226,773 | -$151,406 | $0 |
| 10 | $87,047 | $218,616 | -$131,569 | $0 |
| 11 | $99,572 | $209,891 | -$110,319 | $0 |
| 12 | $113,003 | $200,559 | -$87,556 | $0 |
| 13 | $127,404 | $190,577 | -$63,173 | $0 |
| 14 | $142,847 | $179,900 | -$37,053 | $0 |
| 15 | $159,406 | $168,480 | -$9,074 | $0 |
| 16 | $177,162 | $156,264 | $20,897 | $14,908 |
| 17 | $196,201 | $143,198 | $53,003 | $46,333 |
| 18 | $216,617 | $129,222 | $87,395 | $80,028 |
| 19 | $238,508 | $114,273 | $124,235 | $116,160 |
| 20 | $261,983 | $98,283 | $163,700 | $154,904 |
| 21 | $287,154 | $81,180 | $205,974 | $196,448 |
| 22 | $314,145 | $62,886 | $251,259 | $240,996 |
| 23 | $343,087 | $43,318 | $299,769 | $288,764 |
| 24 | $374,121 | $22,388 | $351,733 | $339,985 |
| 25 | $407,399 | $0 | $407,399 | $394,909 |
Investment gains are taxed; mortgage interest is (potentially) deductible. These after-tax figures change the comparison.
How to Use This Calculator
Enter your current mortgage balance, interest rate, years remaining, and how much extra you have each month. Then enter your expected investment return and tax rate. The calculator shows which path builds more net worth by the end of your original loan term.
Quick Result
The "Pay Off" path adds your extra money to each mortgage payment, pays off the loan early, then invests the freed-up full payment for the remaining months. The "Invest" path makes normal mortgage payments and invests the extra monthly. Both paths are compared at the same endpoint.
Advanced: Year-by-Year Table
The year-by-year table shows mortgage balance and portfolio value for both paths each year, so you can see exactly when and by how much one path outperforms the other. This helps you understand the dynamics, not just the final number.
Professional: After-Tax Scenario Matrix
The scenario matrix shows the after-tax recommendation across 5 investment returns and 3 mortgage rates. Your situation is visible in context of all the scenarios, helping you understand how sensitive the decision is to rate assumptions.
The Math Behind the Decision
Monthly extra → added to mortgage payment
Mortgage paid off early by N months
After payoff: invest (regular payment + extra) for N months
Final net worth = investment portfolio value
Path B (Invest Instead):
Monthly extra → invested each month
Mortgage paid on normal schedule
Final net worth = portfolio − remaining balance
Break-Even Return =
Investment return where Path B portfolio ≥ Path A interest saved
After-Tax Comparison:
Effective mortgage rate = Rate × (1 − Marginal Tax Rate)
Effective invest return = Expected Return × (1 − Capital Gains Rate)
The key insight: paying off a mortgage is a guaranteed, risk-free return equal to your interest rate. Investing has the potential for higher returns but with volatility and tax friction. At a 6.75% mortgage rate, you need to reliably earn more than 6.75% after taxes to come out ahead by investing.
Example: $300,000 Mortgage at 6.75%, 25 Years Remaining
Tom has $600/month extra. Should he pay off or invest?
| Mortgage Balance | $300,000 |
| Rate / Years Left | 6.75% / 25 years |
| Extra Monthly | $600 |
| Expected Investment Return | 7% |
| Tax Rate | 22% |
| Pay Off Path: Interest Saved | ~$82,000 |
| Pay Off Path: Early by | ~8 years |
| Invest Path: Portfolio After 25 yrs | ~$486,000 |
| Pay Off Path: Net Worth at 25 yrs | ~$410,000 |
| Winner at 7% return | Invest by ~$76,000 |
| Break-Even Return | ~5.9% |
At 7% return, investing slightly wins — but the numbers are close. If markets return only 5.9% or below, paying off is better. Tom's risk tolerance and job security should factor into the decision.