Pay Off the Mortgage or Invest? Calculator
Same extra money each month (and a yearly bonus): pay down the mortgage, or invest it. See which comes out ahead, after inflation.
In 25 years, when the loan would be paid off anyway
Investing the extra wins by $134,724
Invested by then, after tax on gains: paying off early $411,939, investing the extra $546,663. In today’s dollars: $196,744 vs $261,089 (a $64,345 difference).
- Paid off early in15 years 11 months9 years 1 month sooner
- Interest saved$125,588
- Your payment$2,026/moprincipal and interest
- Winner, in today’s dollars$64,345after 3% a year inflation
Pay off early, then investInvest the extra now
The rule of thumb
Paying extra principal earns exactly your mortgage rate (6.5%), guaranteed. Investing wins when your return beats that after tax, which stocks usually do over 10+ years, but not every year.
Inflation works for the borrower
Your payment never changes, but money loses value. At 3% inflation, the last payment of $2,026 costs about $967 in today’s dollars, and your 6.5% mortgage really costs about 3.4% a year after inflation. Paying it off early gives up that cheap, fixed-rate debt; investing keeps it and lets your money grow on top.
Beyond the math
Money in investments is there if you lose your job; money in your house isn’t, until you sell or borrow. A paid-off home is peace of mind and lower bills in retirement. Many people split the difference.
Assumes a steady return and the same extra amounts every month and every year. Before any mortgage interest deduction. Today’s dollars divide the end result by inflation over the loan’s remaining years.
Important — please read
This calculator is an educational tool. It shows a simple projection from the assumptions you enter: it assumes a steady rate every year with no interruptions, and any tax or inflation adjustment uses the simple rates you choose. It does not account for fees, market volatility, sequence-of-returns risk, changes in tax law, or changes to your contributions or circumstances. Real investment returns vary widely year to year and can be negative. Past performance does not predict future results.
The numbers shown are hypothetical illustrations, not a forecast, a promise, or a recommendation, and nothing here is investment, tax, legal, or financial advice or an offer or solicitation to buy or sell any security. Paycheck Paradox (YOTTADESIGN, LLC) is not a registered investment adviser, broker-dealer, or tax advisor.
Before making any financial decision, talk to a qualified professional — a licensed financial advisor, CPA, or attorney — who can account for your full situation. You are solely responsible for your own decisions.
Provided “as is”, with no warranty of accuracy or fitness for any purpose. To the fullest extent permitted by law, Paycheck Paradox accepts no liability for any loss arising from use of, or reliance on, this tool.