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Extra Mortgage Payment vs Invest Calculator

Find out whether an extra payment every month beats putting that money in the market until your loan would have ended.

How it is calculated

First the tool computes the regular payment of a fixed-rate loan: payment = balance × r ÷ (1 − (1 + r)−n), with r = rate ÷ 12 and n the number of months (a 0% rate is split evenly). Strategy A adds the extra amount to every payment, so the loan ends early; after that the whole payment plus the extra is invested until the original end date. Strategy B pays the loan on the normal schedule and invests the extra every month. Investments grow at return ÷ 12 a month. Both are measured at the original end date as investments − tax on gains, where gains exclude the money put in. The larger figure wins. Interest saved and months saved describe strategy A. Property value and inflation are not modelled.

Worked example

A balance of 250000 at 6.5% over 25 years has a payment of $1,688.02. Extra money: 300 a month; investments return 7% with 15% tax on gains. Paying the extra shortens the loan by 88 months and saves $85,737.48 in interest, and after it ends the freed-up payments are invested, giving $219,854.49 after tax. Investing the 300 a month from the start gives $220,068.28. The difference is only $213.79, so the tool says "Invest the extra instead". At a 3% mortgage rate the gap widens to $71,752.14.

Try this example →

Common mistakes

  • Entering the remaining years, not the original term: the tool compares wealth at the end of the term you type, so use the remaining term and the current balance together.
  • Entering the monthly payment as the extra: the tool already calculates the regular payment; only the amount above it goes in the extra field.
  • Treating the investment return as guaranteed: a constant 7% every month is an assumption, and when the mortgage rate is near it the answer is a coin toss, as the $213.79 gap shows.
  • Typing a rate such as 0.065 instead of 6.5: the tool reads 0.065% and the loan looks almost interest-free.
  • Forgetting that investing keeps the cash accessible while a prepayment does not; the tool compares only the final numbers.

About this calculator

This comparison runs two amortization paths side by side: one where extra principal goes straight onto your mortgage each month, shortening the loan and cutting the interest you would otherwise pay on the remaining balance, and one where that same money is invested instead and left to compound at an assumed rate of return over the same period. The mortgage path is a guaranteed return equal to your loan's interest rate, since every dollar of prepaid principal is a dollar you will never pay interest on again. The investing path is an uncertain return that depends on markets, but is typically expected to be higher over long horizons and, unlike home equity, stays liquid and accessible.

Homeowners run this calculation when they have spare cash each month and are deciding between debt payoff and building an investment portfolio, particularly after a raise, a bonus, or once other higher-interest debt is cleared. The decision usually tips toward extra payments when the mortgage rate is high relative to expected investment returns, when the borrower values the certainty and peace of mind of a paid-off home, or when they are risk-averse and close to retirement; it tips toward investing when the mortgage rate is comparatively low, the money can go into a tax-advantaged account, or the borrower has a long time horizon and can tolerate market volatility.

This calculator amortizes your mortgage under both scenarios and reports the interest saved and time shaved off the loan from extra payments against the projected balance of investing the same cash, so you can see the numeric trade-off before choosing a path.

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