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Should you pay down debt or invest the extra?

What your financial advisor isn't telling you. Run the real numbers on paying down your mortgage vs investing in the market.

Your Mortgage

Extra Money

$300
S&P 500 historical avg ~7%
Investment account type
Itemize mortgage interest?

Investing comes out ~$18,789 ahead on median, but mortgage payoff is a guaranteed 6.5% return with zero risk. Consider splitting the difference.

Pay Extra on Mortgage
Interest saved$113,607
Time saved11 yr 10 mo
Guaranteed return6.5%
Zero risk
Invest Instead
Portfolio at payoff$132,396
Expected return7.0%
Net advantage$18,789
Market risk - returns not guaranteed

Investment Probability vs Mortgage Balance

Shaded bands show the range of likely investment outcomes (10th-90th percentile). The mortgage payoff line is guaranteed.

Investment portfolio

Grows with market, but uncertain

Mortgage balance

Guaranteed decline to zero

The rate comparison (after tax)

6.5%

Mortgage (guaranteed)

vs
7.0%

Investment (expected)

Extra Payment vs Investing
whatbankshide.com
Investing wins
Mortgage interest saved$113,607
Investment portfolio$132,396
Net advantage$18,789 (investing)
Extra monthly$300/mo

How It Works

We model two scenarios: putting your extra monthly amount toward your mortgage principal (saving interest, guaranteed) vs investing it in the market (growing your portfolio, not guaranteed).

The investment projection uses a probability fan based on historical stock market volatility (~15% annual standard deviation). We show the 10th through 90th percentile outcomes so you can see the realistic range, not just the average. Tax treatment is applied to investment returns based on your account type.

Key insight: The right answer depends on your risk tolerance as much as the math. If the guaranteed mortgage return is within 1-2% of the expected investment return, the psychological comfort of debt payoff may outweigh the marginal expected gain from investing.

You might also need

Mortgage Early Payoff

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Compound Interest Visualizer

See how your investment grows over time

Refinance Break-Even

Lower your rate first, then decide about extra payments

Frequently Asked Questions

Is mortgage payoff really a 'guaranteed return'?
Yes. When you pay $1 extra toward your mortgage, you save the interest you would have paid on that dollar for the remaining loan term. At a 6.5% mortgage, each extra dollar earns a guaranteed 6.5% annual return (adjusted for your tax situation). No market investment offers guaranteed returns. See our detailed guide at /guides/should-i-pay-extra-or-invest.
How does the tax treatment affect the comparison?
Investment returns are taxed differently depending on the account type. Roth accounts grow tax-free. Tax-deferred accounts (401k, traditional IRA) defer taxes until withdrawal. Taxable brokerage accounts pay capital gains tax. Meanwhile, mortgage interest may be deductible if you itemize. All of these affect the after-tax comparison.
What does the fan chart show?
The shaded bands show the range of likely investment outcomes based on historical market volatility. The darkest band (25th-75th percentile) shows where your portfolio will likely end up 50% of the time. The lighter band (10th-90th) captures 80% of outcomes. The mortgage payoff line is a single guaranteed path.
Why not split the difference?
That's often the smartest move! Many financial advisors suggest: first max out any employer 401k match (that's free money), then pay extra on high-rate debt, then invest in tax-advantaged accounts. There's no rule saying it has to be all-or-nothing.
What about the S&P 500 average of 10%?
The commonly cited 10% is the nominal (before inflation) average. After inflation, it's about 7%. We default to 7% because your mortgage rate is also nominal. For the most accurate comparison, keep both rates in the same terms.