Should I Pay Extra on My Mortgage or Invest? | Free Calculator
Calculate exactly how much you'll save with extra mortgage payments vs investing. See interest saved, years cut off your loan, and which strategy builds more wealth.
Should I Pay Extra on My Mortgage or Invest?
Enter your loan details and see exactly how much extra payments save in interest. Then compare that to what you'd earn by investing the same money instead.
Loan Details
Extra Payments
Additional amount paid each month
One-time payment each year (e.g., bonus)
Investment Comparison
Historical stock market average is ~7-10%
Enter your loan details and extra payment amounts, then click "Calculate Impact" to see how much you'll save.
What This Calculator Answers
Every extra dollar you put toward your mortgage is a dollar that can't be invested elsewhere. This calculator answers the fundamental question: Does paying down your mortgage faster build more wealth than investing that money?
The math depends on your mortgage rate, expected investment returns, tax situation, and risk tolerance. This tool runs both scenarios side-by-side so you can see the actual dollar difference—not just theory.
When Extra Payments Make Sense
- ✓Your mortgage rate exceeds 6% — At higher rates, the guaranteed return from debt payoff often beats uncertain market returns after taxes.
- ✓You value certainty over potential — Debt payoff is a guaranteed return. Markets can drop 30% in a year. If that would stress you, prioritize the mortgage.
- ✓You're approaching retirement — Entering retirement debt-free provides flexibility and reduces required income.
- ✓You've maxed tax-advantaged accounts — If your 401(k) and IRA are full, extra mortgage payments may beat taxable brokerage investing.
When Investing Makes More Sense
- →Your mortgage rate is under 4% — Low-rate mortgages from 2020-2021 are essentially cheap money. Investing likely wins.
- →You have decades until retirement — Time in market matters. A 30-year-old with a 3.5% mortgage should probably invest.
- →You haven't maxed retirement accounts — 401(k) matches and tax-advantaged growth usually beat mortgage payoff.
- →You need liquidity — Money in your home is trapped. Investments can be accessed in emergencies.
Frequently Asked Questions
Should I pay extra on my mortgage or invest the money?
Compare your mortgage rate to expected investment returns after taxes. If your mortgage is 6.5% and you expect 7% returns (5% after taxes), paying down the mortgage wins. But if you expect 10% returns, investing likely wins mathematically—though debt payoff offers guaranteed returns and peace of mind.
How much does an extra $200/month save on a mortgage?
On a $300,000 loan at 6.5% for 30 years, an extra $200/month saves approximately $82,000 in interest and pays off the loan 7 years early. The exact savings depend on your specific loan terms.
Is it better to make extra payments monthly or annually?
Monthly extra payments save slightly more interest because they reduce principal sooner. However, annual lump sums (like tax refunds or bonuses) are easier for many people to budget. The difference is usually small—consistency matters more than timing.
What's the best way to pay off a mortgage early?
The most effective strategies are: 1) Add a fixed extra amount monthly, 2) Make one extra payment per year, 3) Round up your payment to the nearest $100, or 4) Apply windfalls like bonuses directly to principal. All reduce interest significantly over time.
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