Overpayment vs Investing Calculator

Compare three strategies: standard mortgage payoff, accelerated payoff with overpayment, or investing your overpayment instead. See which approach builds more wealth over time.

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We've calculated your current monthly mortgage payment: $1,520
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The Great Debate: Mortgage Payoff vs Investing

Arguments for Paying Off Mortgage Early

  • • Peace of mind: No monthly mortgage payment provides financial security
  • • Guaranteed return: Your mortgage rate is a guaranteed “return” on your money
  • • Forced savings: Builds equity instead of spending extra money
  • • Reduced risk: Less likely to become a forced seller during market downturns
  • • Tax benefits: Mortgage interest deduction may be limited for some taxpayers

Arguments for Investing Instead

  • • Higher potential returns: Stock market historically returns 7-10% annually
  • • Liquidity: Investments can be sold if you need cash
  • • Compound growth: More time in the market means more growth
  • • Tax advantages: Retirement accounts offer tax benefits
  • • Inflation hedge: Investments typically outpace inflation better than home equity

Key Consideration: Forced Selling Risk

During market downturns, investors with mortgages may be forced to sell investments at a loss to make payments. Having a paid-off mortgage eliminates this risk and provides stability during economic uncertainty.

Why Mortgage Payoff Often Wins When Rates Are Equal

When mortgage interest rate = investment return rate, mortgage payoff typically wins because:

🏠 Interest Saved

Compound interest avoided on the full mortgage balance ($300,000+)

📈 Investment Returns

Compound interest earned on just the overpayment amount ($500/month)

Mathematical Reality: Even with equal rates and monthly compounding, the larger base amount (mortgage balance) generates more total interest than the smaller base amount (overpayment contributions).