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Payoff vs Invest Calculator

Should you pay off your mortgage early or invest the difference? Compare both paths honestly — interest saved vs compounded gains.

Where this fits

📈 Investing & WealthCash FlowHomeowners

This tool lives inside Cash Flow and is most useful for homeowners.

401(k) Limit 2024$23,000
Roth IRA Limit$7,000
S&P 500 Avg Return~10%/yr

Recommendation

Invest the extra

Your investments earn roughly 0.1% after tax vs 6.5% on your loan — a 0.3-point spread in favor of investing. Over the full term, that compounds into ~$18,910 more net worth by letting the extra cash grow in the market instead of killing loan principal early.

Your loan

Your extra cash

After-tax return

6.80%

Pay-Off Time
11y
with extra payments
Normal Term
30y
base payment only
Interest Saved
$100,633
by paying down early
Investing Wins By
$18,910
over full term

Net worth over time

Pay off loan
Invest extra
-$114,396$74,900$264,196$453,493$642,7890y5y10y15y20y25y30y

Net worth = portfolio value − remaining loan balance

1

Monthly interest (month 1)

interest = balance × (annual_rate ÷ 12)

$115,000 × (6.5% ÷ 12) = $115,000 × 0.5417%

= $623

Interest decreases each month as the principal balance falls

2

Monthly principal paydown (month 1)

principal = base_payment − interest

$727 − $623

= $104

With the extra payment, Path A adds an additional $500/mo to principal

3

Path A — Payoff early (interest saved)

interest_saved = normal_term_interest − early_payoff_interest

= $100,633

Loan paid off in 11y vs 30y normally

4

Effective after-tax investment return

after_tax_return = investment_return × (1 − tax_rate)

8.0% × (1 − 15%)

= 6.8% / yr

Compared to guaranteed 6.5% by paying off the loan

5

Net worth advantage (Path B vs Path A)

advantage = invest_final_net − payoff_final_net

$642,789 − $623,879

= +$18,910

Investing the extra beats early payoff by this margin

Key insight

Investing wins by $18,910 because your after-tax return (6.8%) beats your loan rate (6.5%) by 0.3 points. Pay off high-interest debt first — below ~5–6%, investing usually wins long-term.

#ShowYourWork

Numbers never leave your browser · Not financial advice

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