Should extra money go to your mortgage principal or into investments? Enter your loan and the extra amount you could spare each month. The calculator runs both plans with the same monthly budget and shows the interest and years you would save, the portfolio you would build and which plan ends with the higher net worth, year by year.
Last updated:
Your mortgage
$
%
years
Principal & interest payment is worked out from balance, rate and years left.
$
Either added to principal or invested.
Investing
% / yr
After fund fees. Not guaranteed.
%
0 for a Roth IRA or other tax-free account.
years
Blank = when the mortgage would end on schedule.
%
Enter your values to see the result.
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How to use the Pay Off Mortgage or Invest Calculator
Enter your mortgage: current balance, interest rate and years left.
Enter the extra amount you could pay toward principal or invest each month.
Set the expected return and the tax rate on investment gains.
Choose the comparison period (blank = until the original payoff date) and tick the deduction if you itemize.
Press Compare plans to see the winner, the interest saved and the net worth chart.
How the comparison works
The regular principal and interest payment is found with the standard loan formula:
Payment = P × i ÷ (1 − (1 + i)−n)
where P is the balance, i the yearly rate ÷ 12 and n the months left. Both plans then spend payment + extra every month:
Prepay: the extra goes to principal, so the loan ends early; afterwards the full payment + extra is invested each month.
Invest: the loan runs on schedule and the extra is invested; after the last payment the full amount is invested.
At the end, net worth = portfolio − tax on gains − mortgage balance. Property taxes, insurance and the home's value are the same in both plans, so they are left out.
Interest saved by an extra $500 a month
$300,000 balance, 30 years left, standard monthly payments:
Rate
Payment (P&I)
Interest, normal schedule
Interest with $500 extra
Paid off
3.0%
$1,264.81
$155,332
$91,106
about 11½ years sooner
5.0%
$1,610.46
$279,767
$155,384
about 12 years sooner
6.5%
$1,896.20
$382,633
$202,874
about 12½ years sooner
7.5%
$2,097.64
$455,152
$233,428
about 13 years sooner
Rounded figures. Enter your own loan above for exact numbers.
Things the numbers don't capture
Risk: the mortgage return is certain; market returns are not. Check the table at lower returns.
Liquidity: invested money can be sold in an emergency; extra principal is locked in the house.
Peace of mind: a paid-off home lowers your monthly costs, which can matter most near retirement.
For a detailed payoff date and schedule with one-time or yearly extra payments, use the mortgage payoff calculator.
Frequently asked questions
Is it better to pay off your mortgage early or invest?
It depends mainly on your mortgage rate compared with the after-tax return you expect from investing, and on how much risk you are comfortable with. Prepaying earns a guaranteed return equal to the mortgage rate. Investing has historically earned more over long periods, but with ups and downs that can leave you behind over shorter periods.
How are the two plans compared?
Both spend the same each month: the regular principal and interest payment plus your extra amount. The prepay plan adds the extra to principal; once the loan is gone, it invests the whole amount. The invest plan pays the loan on schedule and invests the extra from day one. Net worth is the portfolio after tax on gains minus any mortgage left.
Why is the home value not included?
The house is worth the same in both plans, so it does not change which plan is ahead. Net worth here is only the part that differs: investments minus the mortgage balance.
Does the mortgage interest deduction change the answer?
It lowers the effective cost of the mortgage for people who itemize. With the box ticked, each year's interest times your tax rate is treated as a tax saving and invested. Many homeowners take the standard deduction instead, in which case the deduction gives no benefit and should be left off.
What is the break-even return?
The investment return at which both plans end with the same net worth. If you expect to earn more after fees and taxes, investing tends to win; if less, prepaying wins. It is usually near the mortgage rate.
What else should I consider before prepaying?
Money paid into the house is hard to get back without selling or borrowing, so keep an emergency fund first. Capture any employer retirement match, pay off higher-rate debt first, and check whether your loan has any prepayment penalty. Being mortgage-free before retirement also lowers the income you need.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.