Should I pay off my mortgage early or invest the money?

It depends on whether your expected return clears the breakeven rate this calculator solves for. Paying down a mortgage is a guaranteed return equal to its interest rate, so with no tax effects an investment has to beat that rate to win. Taxes move the bar in both directions: gains in a taxable account raise it, and a deductible mortgage lowers it. The calculator shows you the exact figure for your own numbers.

Why compare over the original payoff date rather than a fixed number of years?

Because the two plans finish at different times. If you stop measuring when the overpaid mortgage is cleared, you credit that path for finishing early while ignoring the years the other path is still compounding. Running both to the original payoff date, with the same monthly outflow throughout, is the only way to compare them on equal terms.

What happens to the money after the mortgage is paid off early?

It gets invested, and the calculator models that explicitly. Once Scenario A clears the mortgage, the entire former payment, the minimum plus your extra, goes into the market every month until the horizon. Leaving this step out is the most common flaw in payoff calculators, and it systematically overstates the case for paying down early.

Does the mortgage interest deduction change the answer?

Only if you itemize. Most filers take the standard deduction and get no additional benefit from mortgage interest, in which case it should be ignored entirely. The mortgage calculator shows the payment itself, escrow included, if that is what you came for. If you do itemize, the deduction reduces the effective cost of keeping the mortgage and therefore lowers the return an investment needs to beat. Note that the calculator assumes all of your interest is deductible, which overstates the benefit if your itemized deductions only narrowly exceed the standard deduction.

Does it matter whether I use a 401(k), an IRA or a taxable account?

For the breakeven rate, tax-deferred and Roth accounts give the same answer, because a flat marginal rate scales both scenarios equally and cancels out. Only a taxable account moves the breakeven, because the annual tax drag reduces the return you actually earn. The account type does change the dollar amounts you end up with, which is why both curves are shown.

Is a guaranteed mortgage payoff really comparable to an uncertain market return?

No, and that is the most important limitation here. Paying down a mortgage is certain; an investment return is not. This calculator compares expected values and says nothing about risk. A breakeven of 6% does not mean a 7% expected return is the better choice, it means it is the better bet, which is a different claim. Liquidity matters too: money in the market can be reached, while equity in a house generally cannot without borrowing against it. Against a cash account rather than the market, the bar is different again.

Why does my answer differ from another calculator?

Usually because the other one does not reinvest the freed-up payment after an early payoff, or because it compares the two paths over different horizons. Both choices favour paying down early. Differences in tax treatment, payment timing within the month, and rounding also contribute. The methodology above states every assumption used here so you can see exactly where the two models part company. If what you are weighing is a biweekly plan rather than spare cash, that has its own comparison.

Should I Pay Off My Mortgage or Invest?

Should I pay off my mortgage or invest? It comes down to a single rate. Paying a mortgage down is a guaranteed return equal to its interest rate, so an investment has to clear that bar after tax to be the better bet, and this works out exactly where the bar sits for your numbers.

Example numbers

The verdictfrom an example

An investment has to beat 6.50% a year to come out ahead of paying the mortgage down.

Worked on $300,000 left at 6.50%, 30 years to run, $500 a month spare. Change anything below to use yours.

Your expected return7.00%

6.50%The bar to beat

← Paying it down winsInvesting wins →

Breakeven return: 6.50%
Interest saved by overpaying: $179,762

The figures behind it

Breakeven return: 6.50%; The annual return at which both paths end with the same net worth.
Interest saved by overpaying: $179,762; Total interest avoided in Scenario A.
Mortgage retired earlier: 12 years, 6 months; Scenario A is debt free in month 210 of 360.
Scenario A, pay down, then invest: $435,409; Net worth at the original payoff date, after tax.
Scenario B, invest from month one: $463,585; Net worth at the same date, after tax.
At 7.0%, investing ends: +$28,177; Investing the extra comes out ahead at your expected return.

Both paths over time

Years from today

Pay down, then investInvest the extra

Payment scheduleShow

The table scrolls sideways

Year	A · mortgage	A · invested	A · net worth	B · mortgage	B · invested	B · net worth
1	$290,465	$0	-$290,465	$296,647	$6,196	-$291,938
2	$280,291	$0	-$280,291	$293,069	$12,841	-$283,310
3	$269,436	$0	-$269,436	$289,252	$19,965	-$274,078
4	$257,854	$0	-$257,854	$285,179	$27,605	-$264,199
5	$245,496	$0	-$245,496	$280,833	$35,796	-$253,628
6	$232,311	$0	-$232,311	$276,197	$44,580	-$242,315
7	$218,242	$0	-$218,242	$271,249	$54,000	-$230,210
8	$203,232	$0	-$203,232	$265,971	$64,099	-$217,255
9	$187,216	$0	-$187,216	$260,338	$74,929	-$203,392
10	$170,127	$0	-$170,127	$254,329	$86,542	-$188,557
11	$151,895	$0	-$151,895	$247,917	$98,995	-$172,681
12	$132,440	$0	-$132,440	$241,076	$112,348	-$155,692
13	$111,684	$0	-$111,684	$233,777	$126,665	-$137,511
14	$89,536	$0	-$89,536	$225,989	$142,018	-$118,055
15	$65,906	$0	-$65,906	$217,679	$158,481	-$97,233
16	$40,693	$0	-$40,693	$208,812	$176,134	-$74,951
17	$13,792	$0	-$13,792	$199,352	$195,063	-$51,104
18	$0	$14,927	$11,345	$189,259	$215,361	-$25,585
19	$0	$45,701	$34,733	$178,489	$237,125	$1,726
20	$0	$78,700	$59,812	$166,998	$260,463	$30,954
21	$0	$114,084	$86,704	$154,737	$285,489	$62,234
22	$0	$152,027	$115,540	$141,656	$312,323	$95,710
23	$0	$192,712	$146,461	$127,698	$341,097	$131,536
24	$0	$236,338	$179,617	$112,806	$371,951	$169,877
25	$0	$283,118	$215,170	$96,916	$405,036	$210,912
26	$0	$333,280	$253,293	$79,962	$440,512	$254,828
27	$0	$387,068	$294,172	$61,872	$478,553	$301,828
28	$0	$444,744	$338,006	$42,571	$519,344	$352,130
29	$0	$506,590	$385,008	$21,978	$563,084	$405,966
30	$0	$572,906	$435,409	$0	$609,981	$463,585

What this result assumes

Both paths spend the same amount every month for all 360 months, so the comparison is like for like.
Mortgage interest is not treated as deductible, which is what applies to the large majority of filers, who take the standard deduction.
Tax-deferred balances are taxed in full at withdrawal. The up-front deduction on contributions is not modelled, so these figures are conservative.

Methodology

Reviewed August 30, 2026

The comparison

Both scenarios spend exactly the same amount of cash every month, and both are measured on the same date — the day the mortgage would have been paid off had you never overpaid. Comparing a shorter plan against a longer one is the most common way these calculators go wrong, because the plan that finishes sooner looks better simply for having stopped earlier.

Scenario A pays the minimum plus your extra amount until the mortgage is gone, then invests the entire former payment — minimum and extra together — for every month remaining to the horizon. Scenario B pays only the minimum for the full original term and invests the extra from the first month.

That reinvestment step in Scenario A is the one most tools leave out. Without it, the money freed up by an early payoff simply vanishes from the model, which quietly overstates the case for paying down early. It is also why the two paths can be compared honestly at all: the monthly outflow is identical, so nothing is being smuggled into either side.

The mortgage

The level monthly payment is the standard amortization formula, M = P × [r(1 + r)^n] ÷ [(1 + r)^n − 1], where P is the current balance, n the remaining months and r the monthly rate. US mortgages quote a nominal annual rate compounded monthly, so r is simply the annual rate divided by twelve.

At a 0% rate that formula is undefined, so the balance is divided evenly across the remaining months instead. Interest is rounded to the cent each month, exactly as a servicer would, and the final payment absorbs whatever rounding remainder has built up so the balance lands on precisely zero.

Any extra payment is applied straight to principal in the month it is made, which shortens the term rather than reducing the scheduled payment.

The investments

Contributions are made at the end of each month and grow at one twelfth of the annual return. There is no attempt to model volatility, sequence-of-returns risk or fees — the return you enter is treated as though it arrived smoothly, which is the same simplification every calculator of this kind makes and is worth remembering when reading the result.

A taxable account is modelled as paying tax on its gains each year at your marginal rate, applied as a drag on the return itself. This is deliberately harsher than reality, where qualified dividends and long-term capital gains are usually taxed more lightly and only when realised. Treating it this way keeps the model simple and errs against investing rather than for it.

Tax-deferred balances — 401(k) and traditional IRA — compound untouched and are then taxed in full at your marginal rate at the horizon. Roth balances are never taxed. Both terminal figures are net of any mortgage balance still outstanding.

The mortgage interest deduction

If you tell the calculator you itemize, mortgage interest is treated as reducing your taxable income at your marginal rate, so each month generates a tax saving equal to that month’s interest multiplied by that rate. If you do not itemize, mortgage interest is ignored entirely, which is the right answer for the large majority of filers who take the standard deduction and would get no additional benefit from the interest they pay.

This is a simplification in one important respect: it assumes every dollar of interest is deductible, when in reality only the amount by which your itemized deductions exceed the standard deduction provides any benefit. It therefore overstates the deduction for filers who itemize only narrowly. The calculator does not model the standard deduction, filing status, state taxes, the mortgage-balance limits on deductibility, or the fact that a refund arrives once a year rather than monthly.

You choose whether the saving is invested alongside your other contributions or held as cash. Investing it is the default because every other spare dollar in the model is invested, and treating this one stream differently would be inconsistent. It does slightly overstate the benefit, since a real refund arrives annually rather than every month.

The breakeven rate

The headline number is found by bisection. The difference between the two terminal net-worth figures is evaluated at 0% and at 20%; if it changes sign somewhere between, the interval is halved repeatedly until it is narrower than one basis point, which takes about eleven steps. The search is capped so it always terminates.

Bisection is valid here because the difference between the two scenarios increases steadily with the return: both spend the same cash each month, so the only thing that changes is how early those dollars reach the market. Scenario B invests earlier and smaller amounts, Scenario A later and larger ones, which makes higher returns monotonically better for B.

Some inputs have no crossing at all. A very low mortgage rate is beaten by almost any return, and a very high one by almost none. The calculator says so plainly rather than reporting a number that does not exist.

A result worth knowing

With no tax effects on either side, the breakeven return is exactly your mortgage rate. That is not a coincidence — paying down a mortgage is a guaranteed return equal to its interest rate, so any investment must clear the same bar to compete.

Under a flat marginal rate the breakeven is identical for a 401(k), a traditional IRA and a Roth. The tax scales both scenarios by the same factor and cancels out of the comparison. The account type changes how much money you end up with, but not which path wins.

For a taxable account where you itemize, the investment drag and the interest deduction are the same multiplier applied to opposite sides of the comparison, so they cancel and the breakeven returns to your plain mortgage rate.

Assumptions

Both scenarios spend the same amount each month and are measured on the same date, the original payoff date.
The interest rate, expected return, marginal tax rate and monthly payment are constant for the whole term.
Returns arrive smoothly. Volatility, sequence-of-returns risk, fund fees and trading costs are not modelled.
Investment contributions are made at the end of each month; mortgage interest accrues monthly on the outstanding balance.
Taxable accounts are taxed annually on gains at your marginal rate, which is harsher than real capital-gains treatment.
Tax-deferred balances are taxed in full at withdrawal. The up-front deduction on contributions is not modelled, making those figures conservative.
The mortgage interest deduction, when enabled, assumes every dollar of interest is deductible. The standard deduction, filing status, state taxes and balance limits are not modelled.
Inflation is ignored. Every figure is nominal, so both paths are understated equally in real terms.
Property taxes, insurance, PMI, HOA dues, refinancing costs and prepayment penalties are excluded.
No employer match, contribution limit, early-withdrawal penalty or required minimum distribution is modelled.

Sources

Common questions

Should I pay off my mortgage early or invest the money?: It depends on whether your expected return clears the breakeven rate this calculator solves for. Paying down a mortgage is a guaranteed return equal to its interest rate, so with no tax effects an investment has to beat that rate to win. Taxes move the bar in both directions: gains in a taxable account raise it, and a deductible mortgage lowers it. The calculator shows you the exact figure for your own numbers.
Why compare over the original payoff date rather than a fixed number of years?: Because the two plans finish at different times. If you stop measuring when the overpaid mortgage is cleared, you credit that path for finishing early while ignoring the years the other path is still compounding. Running both to the original payoff date, with the same monthly outflow throughout, is the only way to compare them on equal terms.
What happens to the money after the mortgage is paid off early?: It gets invested, and the calculator models that explicitly. Once Scenario A clears the mortgage, the entire former payment, the minimum plus your extra, goes into the market every month until the horizon. Leaving this step out is the most common flaw in payoff calculators, and it systematically overstates the case for paying down early.
Does the mortgage interest deduction change the answer?: Only if you itemize. Most filers take the standard deduction and get no additional benefit from mortgage interest, in which case it should be ignored entirely. The mortgage calculator shows the payment itself, escrow included, if that is what you came for. If you do itemize, the deduction reduces the effective cost of keeping the mortgage and therefore lowers the return an investment needs to beat. Note that the calculator assumes all of your interest is deductible, which overstates the benefit if your itemized deductions only narrowly exceed the standard deduction.
Does it matter whether I use a 401(k), an IRA or a taxable account?: For the breakeven rate, tax-deferred and Roth accounts give the same answer, because a flat marginal rate scales both scenarios equally and cancels out. Only a taxable account moves the breakeven, because the annual tax drag reduces the return you actually earn. The account type does change the dollar amounts you end up with, which is why both curves are shown.
Is a guaranteed mortgage payoff really comparable to an uncertain market return?: No, and that is the most important limitation here. Paying down a mortgage is certain; an investment return is not. This calculator compares expected values and says nothing about risk. A breakeven of 6% does not mean a 7% expected return is the better choice, it means it is the better bet, which is a different claim. Liquidity matters too: money in the market can be reached, while equity in a house generally cannot without borrowing against it. Against a cash account rather than the market, the bar is different again.
Why does my answer differ from another calculator?: Usually because the other one does not reinvest the freed-up payment after an early payoff, or because it compares the two paths over different horizons. Both choices favour paying down early. Differences in tax treatment, payment timing within the month, and rounding also contribute. The methodology above states every assumption used here so you can see exactly where the two models part company. If what you are weighing is a biweekly plan rather than spare cash, that has its own comparison.

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