Mortgage vs. invest calculator guide
This calculator compares using available money to pay a fixed-rate mortgage down early with investing that same money on the same dates. It follows both choices month by month and compares their after-tax incremental net worth on one common end date.
What it calculates
The calculator first reconstructs the mortgage balance from the original loan amount, fixed rate, term, and years already paid. It then runs two plans from that same balance: one sends the chosen extra money to principal, while the other invests it. Both plans keep the same total cash budget and the same timing.
When the early-payoff plan clears the loan, it cannot overpay. The amount of the monthly budget no longer needed by the mortgage moves into that plan’s investment account. This keeps the comparison symmetrical through the selected horizon rather than stopping one plan early.
Payoff strategies
A — One-time payoff
Choose when the payoff happens. On that date, the payoff plan uses a lump sum equal to the mortgage balance; the investing plan puts the same lump sum into the market. The payoff plan then invests its freed contractual payments while the investing plan continues the mortgage.
B — Recurring extra payment
Enter a dollar amount or percentage of the contractual payment. The payoff plan adds it to principal each month; the investing plan invests it each month. After the early-payoff plan clears the loan, that plan invests its full former monthly budget.
Equal budget comparison
Start: Same current mortgage, same monthly cash budget, same lump sum if strategy A is selected, and the same comparison date.
Pay-down branch
Send the chosen extra cash to mortgage principal. Avoid the contractual interest that would otherwise accrue on that principal. Once the loan is clear, invest the freed budget.
Investing branch
Make the untouched contractual mortgage payment and invest the same extra cash at the same time. Keep the mortgage balance and the market investment until the common end date.
Finish: For each branch, subtract the remaining mortgage from the investment value after the assumed tax on gains. Compare those two incremental net-worth figures.
Major inputs
- Original loan amount
- The amount borrowed when the mortgage began, not necessarily the amount owed today.
- Interest rate and term
- The fixed annual rate and full original term. Together they determine the contractual principal-and-interest payment.
- Years already paid
- How far the loan has progressed. The model replays the untouched contractual schedule to estimate today’s starting balance and remaining term.
- Payoff timing or recurring extra
- Strategy A chooses the date of a whole-balance lump payment. Strategy B chooses an extra dollar amount or percentage paid every month.
- Investment return
- The effective annual growth assumed for invested cash. It is a scenario input, not a promised or risk-adjusted return.
- Comparison period
- The common date on which both plans are valued. It can be entered directly. With matching enabled, recurring-extra Strategy B uses its early-payoff date; one-time Strategy A uses the original contractual payoff date.
- Tax on investment gains
- An effective rate applied once at the end to positive investment growth only. Contributions are not taxed by this field.
The contractual payment is not an editable spending choice in this comparison: it comes from the loan terms. The extra cash is the budget whose destination changes.
What the results mean
- After-tax incremental net worth
- The modeled investment value after the assumed gains tax, minus the mortgage still owed. It can be negative and does not include the home value shared by both plans.
- Net-worth advantage
- The absolute difference between the two ending incremental net-worth figures. The headline names the plan with the higher figure.
- Remaining mortgage
- Principal still owed on the common comparison date. Zero means that plan has cleared the loan.
- Investment balance
- Cash contributions plus modeled growth. Charts can show the account before the assumed end tax; final net worth uses its after-tax value.
- Interest saved
- Mortgage interest charged to the investing plan minus interest charged to the early-payoff plan over the same modeled period.
- Payoff date
- The first month the early-payoff plan reduces the balance to zero. A final payment uses only the amount actually owed.
- Break-even return
- The annual investment-return assumption at which both plans finish with equal incremental net worth, with the mortgage, timing, horizon, and tax assumptions held fixed.
A higher ending figure is not automatically the better personal choice. Use the balance, interest, and return charts to understand the sources of the projected net-worth difference, then weigh market risk, liquidity, debt tolerance, and taxes separately.
Worked example
Hypothetical: invest or add $500 to a $300,000 mortgage
Suppose a new $300,000 fixed-rate mortgage has a 6% rate and 30-year term. Its contractual principal-and-interest payment is about $1,798.65 a month. Choose strategy B and compare paying an extra $500 a month with investing $500 a month.
Use a fixed 20-year comparison period, a 7% effective annual investment return, and a 15% tax on positive investment gains at the end. Leave “match the years to the mortgage payoff date” off so both plans are measured after the full 20 years.
Adding $500 to principal avoids about $106,468 of contractual mortgage interest over these 20 years, but investing finishes slightly ahead because the assumed market growth compounds. The lead is narrow relative to the balances involved. A lower realized return, investment fees, or a different tax result could reverse it; a higher return could widen it.
Assumptions and limitations
- The mortgage is fixed-rate and follows the contractual schedule before the modeled early payments. Adjustable rates, refinancing, missed payments, escrow, and loan modifications are not modeled.
- “Match the years to the mortgage payoff date” has strategy-specific behavior: Strategy B matches its early payoff, while Strategy A uses the original contractual payoff date rather than the selected lump-sum payoff year.
- Paying principal early avoids future contractual interest under the entered loan terms. That is not the same as earning a guaranteed investment return: deductions, loan provisions, inflation, and the value of liquidity can change the economic comparison.
- Extra principal becomes home equity and is generally less liquid than a market account. Accessing it later may require a sale or new borrowing, with costs and no assurance of approval.
- Investment returns are uncertain and can be negative. The calculator uses a steady assumed return and does not model volatility, sequence of returns, fund fees, or behavioral decisions. Review Investor.gov’s explanation of investment risk and test lower returns.
- The gains-tax field is a simplified effective rate charged once at the end. The calculator does not model account type, tax lots, dividends, annual distributions, state taxes, or tax-law changes.
- Mortgage-interest tax deductions are not modeled. Eligibility and value depend on current law and individual circumstances; see IRS Publication 936 or a qualified tax professional.
- Prepayment penalties are not modeled. Check the note, closing disclosure, and servicer instructions before sending a large extra payment; the CFPB explains when a mortgage may carry a prepayment penalty.
Calculations are estimates for planning and education, not personalized financial, tax, legal, or investment advice. Actual results may differ. Read the Financial Disclaimer.
Sources and further reading
Sources reviewed August 2026. These sources explain concepts and U.S. rules; they do not endorse this calculator or its assumptions.
- Consumer Financial Protection Bureau: How paying down a mortgage works — amortization, principal, interest, and the effect of extra principal.
- Consumer Financial Protection Bureau: Prepayment penalties — when a penalty may apply and where to check.
- Investor.gov: What is risk? — the relationship between risk, potential return, and loss.
- Investor.gov: Understanding fees — how investment fees reduce portfolio value over time.
- IRS Publication 936, Home Mortgage Interest Deduction — current federal eligibility and limits for qualified home-mortgage interest.