Pay Off Mortgage Early vs. Invest
If you have extra cash each month, should it go toward the mortgage or into investments?
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How it works
We grow the same monthly cash inflow at two different rates: the mortgage rate (interest avoided) and your expected investment return. Whichever ends higher wins.
Frequently asked questions
Which is better?
Strictly mathematically, whichever offers the higher after-tax return. If your investment return beats your mortgage rate, investing wins.
What about risk?
Paying down the mortgage is a guaranteed return equal to the rate; investing in stocks is variable. Many people value the guaranteed return.
Should I do both?
Yes — most planners suggest fully funding tax-advantaged accounts and emergency fund first, then split extras between mortgage and taxable investing.
What about tax effects?
Mortgage interest is deductible only if you itemize. Most filers don't, so treat the rate as the after-tax cost.
How does inflation matter?
Inflation erodes the real cost of fixed-rate debt, which favors investing the extra cash.