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Pay off the mortgage, or invest?
Most calculators answer this by comparing your mortgage rate to an expected return and declaring a winner. That's the wrong shape of answer: one of those numbers is guaranteed and the other isn't. This one gives you the breakeven return and the spread of outcomes instead, and lets you decide.
The number that decides it
7.1%
That's the annual return investing would have to beat to come out ahead of putting the $500/month at the mortgage. Below it, prepaying wins. Paying down your 6.5% mortgage is a guaranteed, risk-free 6.5% after tax — investing is neither.
Pay the mortgage down
$548.5K
Clear in 17.5 yrs instead of 30.0, then invest the freed-up $2,396/month.
Invest it instead
$542.46K
At 7% a year, mortgage running its full term.
Both measured at the same date — the loan's original payoff — when both paths own the house outright. That's why the comparison is terminal wealth and not interest saved: prepaying does save $179.76K in interest, and that still isn't the whole answer.
Investing isn't one number — it's a range
Across 2,000 runs sampled from real market history, investing finished ahead of prepaying 79% of the time.
The 10th percentile is the one worth sitting with: $383.29K against a certain $548.5K from prepaying. A one-in-ten outcome is not a rare one over thirty years.
And three things no model prices
- Liquidity. Money in a brokerage can be sold on a Tuesday. Money in your house comes back only by refinancing or moving.
- Sequence risk near retirement. A bad first decade hurts far more when you're about to start withdrawing.
- A paid-off house. Lower required income every month for the rest of your life is worth something the spreadsheet can't score.
Prepaying edges it here by $6.04K — close enough that the assumptions matter more than the verdict. Fuego tracks whichever you choose, quarter by quarter.
Track it over timeBoth sides are in nominal terms, because a mortgage payment is fixed in nominal dollars — inflation quietly works in the borrower's favour. Not modelled: capital-gains tax on sale, employer matches, refinancing, or the option to invest and prepay at once. For education, not financial advice.
Your numbers stay in the URL and in this browser — nothing is sent anywhere, and no account is needed.
Why your mortgage rate is a risk-free return
Every dollar of principal you prepay stops accruing interest at your mortgage rate, for certain, forever. There is no market risk, no sequence risk, and no tax on the gain. A 6.5% mortgage prepayment is a guaranteed 6.5% — which is an extraordinary risk-free return by any historical standard, and the reason this question is genuinely close rather than obvious.
Investing has a higher expected return. It does not have a higher certain return. Comparing 7% to 6.5% as though they were the same kind of number is the error the whole category makes, and it is why this page leads with a breakeven and a distribution rather than a recommendation.
The mortgage interest deduction probably doesn't apply to you
Calculators routinely reduce your mortgage rate by your tax rate, on the assumption the interest is deductible. Since the 2017 tax act roughly doubled the standard deduction, the large majority of filers no longer itemise — and if you don't itemise, the deduction is worth exactly nothing. Even if you do, only the interest above the standard deduction provides any benefit at all.
This calculator defaults to not itemising, which means prepaying earns the full mortgage rate. Turn the toggle on only if you genuinely itemise — it will lower the guaranteed return and make investing look better, which is precisely why getting it wrong matters.
When PMI removal beats everything else
If you're paying private mortgage insurance, prepaying does something no return calculation captures: it ends the PMI sooner. That premium buys you nothing, so removing it early is a pure gain, and on a loan close to the 80% equity threshold it can dominate every other consideration here. Enter your monthly PMI and the balance it drops off at, and watch the breakeven move.
Why the answer changes as you approach retirement
A bad decade in the market matters far more when you're about to start withdrawing than when you have twenty years to recover — the sequence of returns, not just the average, decides the outcome. A paid-off house also lowers the income you need every month, which lowers the portfolio you need to fund it. Both push toward prepaying as retirement gets closer, and neither shows up in a rate comparison.
The honest case for each side
Invest if your mortgage rate is low, your horizon is long, the money would go into tax-advantaged space, and a 10th-percentile outcome wouldn't derail you. Prepay if the rate is high, retirement is close, you're paying PMI, or a guaranteed return simply lets you sleep. The second reason is not irrational — a plan you'll actually stick to beats a marginally better one you'll abandon in a downturn.
Work out the rest of the picture
This decision sits inside a bigger one. Find the number that ends the job requirement, or the point where growth alone finishes the job.