Mortgage Prepayment vs. Invest Calculator

How it works

For each path, future value of the extra monthly amount = P × ((1 + i)^n − 1) ÷ i, where i is the monthly rate (mortgage rate for prepay, expected return for investing) and n = years × 12

Paying down a mortgage earns a guaranteed, tax-free return equal to the loan’s interest rate — every dollar of principal you kill saves that rate in interest, compounding for the life of the loan. Investing the same money targets a higher return but is not guaranteed and can be volatile. This tool grows your extra payment at each rate so you can see the gap in dollars, then decide whether the expected extra from investing is worth the risk. When the two rates are equal, the outcomes match exactly.

Worked example

Putting $300/month extra for 15 years (180 payments): at a 6.5% mortgage rate the avoided interest compounds to about $93,900, while investing at 7% grows to about $97,900 — investing wins by roughly $4,000, but only if the market delivers that 7%. Prepaying’s 6.5% is locked in.

Frequently asked questions