What is the pay off mortgage vs invest calculator?
In short
At a 6.5% mortgage rate vs 8% investment return, investing typically wins by a slim margin. But after tax — mortgage interest deduction reduces the real cost to ~5% — investing at 8% is clearly better. Run the numbers with your actual rate and tax bracket.
Compares the financial outcome of paying extra toward your mortgage vs. investing that same amount each month over a chosen time horizon. Shows interest saved, after-tax benefit, and investment portfolio value.
How to use this calculator
- 1Enter your current mortgage balance and interest rate.
- 2Enter your required monthly payment.
- 3Enter the extra amount you can afford each month.
- 4Set your expected investment return and marginal tax rate.
- 5Choose how many years to analyze.
The formula
- B
- — Remaining mortgage balance
- r_m
- — Monthly mortgage rate (annual rate ÷ 12)
- r_i
- — Monthly investment return (annual return ÷ 12)
- E
- — Extra monthly amount allocated
Worked example
The scenario
$280,000 mortgage at 6.5%, $1,770/month payment, $500/month extra, 8% investment return, 22% tax bracket, 10-year horizon.
The result
Investing wins: portfolio grows to ~$91,000 vs ~$32,000 after-tax interest savings. Difference: ~$59,000 in favor of investing.
Common use cases
- Deciding where to put your year-end bonus.
- Comparing financial strategies after a raise.
- Evaluating the trade-off between guaranteed savings (interest) and expected market returns.
- Planning with a financial advisor using real numbers.
Limitations & assumptions
- Investment returns are assumed constant — real market returns fluctuate.
- Does not model itemized vs. standard deduction — mortgage interest is only deductible if you itemize.
- Does not account for PMI removal from extra payments (which would favor payoff at high LTV).
- Emotional/risk factors (peace of mind from no debt) are not captured in the math.
Frequently asked questions
Should I pay off my mortgage or invest the extra money?
Does the mortgage interest deduction matter?
What if my mortgage rate is higher than investment returns?
Is there a guaranteed way to know which is better?
Can I do both — pay extra AND invest?
Disclaimer: KalkWise calculators are provided for general informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. Results are estimates based on the figures you enter and the assumptions described above. Actual outcomes will vary. Consult a qualified professional before making financial decisions.