About the Pay Off Mortgage vs Invest Calculator
This tool compares a lump sum invested for compound growth with the same lump sum treated as a mortgage payoff benchmark. It helps homeowners and investors estimate which choice may have the higher future value over a selected time period.
How to use this calculator
- Enter the cash amount available as a lump sum.
- Enter your annual mortgage interest rate.
- Enter the expected annual investment return before taxes and fees.
- Enter the number of years for the comparison.
- Click Calculate to see the estimated difference, or Reset to restore the default inputs.
How it works
The calculator uses four inputs: cash amount, mortgage interest rate, expected annual investment return, and number of years. It compounds both the investment return and the mortgage rate over the same time horizon.
Example calculation
Suppose you have $25,000, a 6.50% mortgage rate, an 8.00% expected investment return, and a 10-year horizon. The investment future value is $25,000 × 1.08^10, or about $53,973. The mortgage payoff benchmark is $25,000 × 1.065^10, or about $46,929. The estimated net benefit is about $7,044, so investing comes out ahead under these assumptions.
Frequently asked questions
What does a positive result mean?
A positive result means the compounded investment return is higher than the compounded mortgage payoff benchmark over the selected years.
What does a negative result mean?
A negative result means paying down the mortgage has the higher estimated value under the rates and time period entered.
Does this include taxes or investment fees?
No. The calculator uses expected return before taxes and fees and does not adjust for tax deductions, capital gains, fund expenses, or transaction costs.
Is the mortgage benchmark the same as actual amortization savings?
Not exactly. It compounds the lump sum at the mortgage rate as a simple benchmark and does not model your loan schedule, payment changes, escrow, refinancing, or payoff timing.
Can investment returns be guaranteed in this comparison?
No. The investment return is an assumption, while actual market returns can vary and may be negative. Results are educational estimates and not financial advice.