Mortgage Payoff vs Invest Extra Calculator
Should you throw an extra $500/month at your 6.5% mortgage, or invest it at 8% expected stock returns? It depends on after-tax rates, risk tolerance, and your guaranteed mortgage payoff rate. This calculator runs both paths side by side over your time horizon.
The Math Behind Pay Off vs Invest
Mortgage prepayment offers a guaranteed return equal to your mortgage interest rate. Stock market returns are higher on average (10% historical S&P 500 nominal) but volatile. The decision hinges on three factors: your mortgage rate, your expected after-tax investment return, and your risk tolerance during downturns.
Tax Treatment Changed In 2026
Under the OBBB (One Big Beautiful Bill Act, P.L. 119-21), the SALT cap was modified and most filers take the standard deduction, eliminating mortgage interest deductibility benefits. This shifts the math toward early payoff for high-income households who previously got 22-37% off their interest cost via the deduction.
Behavioral Considerations
Paying off the mortgage delivers a guaranteed psychological win — debt freedom. Investing is statistically better but requires staying invested through 20-40% drawdowns. Many financial planners recommend a hybrid: prepay half the extra payment, invest the other half.
Source: Vanguard 2025 Capital Markets Forecast (8% equity return assumption), IRS Publication 936 mortgage interest deduction rules, OBBB P.L. 119-21. Last updated: May 2026.