Mortgage vs. Invest Calculator
You've got an extra $500 a month. Do you attack the mortgage or feed your investments? This tool runs both scenarios with your actual numbers so you can compare.
Your inputs
🏠 Prepay the mortgage
Mortgage gone — early
Payoff in —
📈 Invest it instead
Portfolio value —
Of — contributed
The bottom line
—
Wealth effect of each choice, year by year
The core insight: prepaying earns a guaranteed return
Here's the mental model that cuts through the whole debate: every extra dollar you put toward your mortgage earns a guaranteed, risk-free return equal to your mortgage rate. With a 6.5% mortgage, prepaying is like buying a 6.5% bond with zero volatility. Investing that dollar instead might earn 8% — or 2%, or −15% in a bad year. The question is whether the expected extra return is worth the risk and the lost liquidity.
The math in this calculator
Prepay path: we amortize your mortgage twice — once with the scheduled payment only, once with the extra added — and the difference in total interest is your savings. The loan also ends sooner.
interest saved = total interest (scheduled) − total interest (with extra)
Invest path: the extra amount is invested monthly at your expected return for the same horizon (until the scheduled payoff date), using standard monthly compounding. Gains = final value − total contributed.
Worked example
$350,000 balance, 6.5% rate, 28 years left, $500/month extra, 8% expected investment return. Prepaying saves about $168,000 in interest and kills the mortgage roughly 10 years early. Investing the $500/month for 28 years at 8% grows to about $624,000 — roughly $456,000 of it gains. On pure expected dollars, investing wins here — but read the caveats before deciding that settles it.
Caveats worth knowing
- Risk isn't free. The 8% is an average; the mortgage saving is contractual. Comparing a risky return to a guaranteed one without adjusting for risk overstates investing's edge.
- Liquidity matters. Dollars prepaid into a mortgage are trapped as home equity — hard to access in an emergency without selling or borrowing. Invested dollars can be tapped (with market risk).
- Taxes change the answer. Mortgage interest may be deductible if you itemize (lowering the effective rate); investment gains face capital-gains or income tax depending on the account. This calculator ignores both — real math should include them.
- Don't invest while carrying high-interest debt — this debate is for mortgages specifically. Credit-card debt at 20%+ should be killed first, always.
- Peace of mind has value. A paid-off house is an unquantifiable sleep-at-night factor. Spreadsheets don't capture it; your life does.
Background: the Consumer Financial Protection Bureau's mortgage guides (consumerfinance.gov) explain amortization and prepayment clearly.