// the eternal dilemma, refereed
Pay off the loan — or invest the difference?
A fair comparison, run to the same end date: prepay first and invest the
freed-up payment afterward, versus invest from day one. Your breakeven return is the
number that decides it.
✓ No lender ads · No fund ads · Just the math
Why most versions of this comparison are rigged
The usual framing stops Path A at the early payoff date and quietly ignores what happens
next — which overstates investing. Here, after the loan dies early, Path A's entire former
payment goes into the same investment for the remaining years. Both paths spend identical
money over the identical horizon, so the two ending balances are directly comparable.
The one number that decides it
Your breakeven return sits almost exactly at your loan's interest rate — because paying
down a 6.5% loan is earning a guaranteed 6.5%. If you expect markets to beat that
after taxes and fees, and you can stomach the volatility, investing wins on paper. If you
value certainty — or you'd be tempted to spend the difference — the payoff wins in practice.
This page referees the math; the choice involves risk tolerance the math can't measure. The
full guide walks through both sides
honestly.
Frequently asked questions
Is paying off a mortgage early the same as a guaranteed return?
Effectively yes: every extra dollar of principal stops accruing interest at your loan rate, so prepaying a 6.5% mortgage earns a risk-free 6.5% — guaranteed, tax-free in effect, and unavailable at any bank.
Why does this comparison run both paths to the same end date?
Because stopping Path A at the early payoff date hides 6+ years of money. Here, after the loan dies early, Path A invests its entire former payment for the remaining years — both paths spend identical money over the identical horizon, so the ending balances are directly comparable.
What return should I assume for the market path?
That's the whole question, which is why it's a slider. US large-cap stocks have averaged roughly 10% per year nominal (about 7% after inflation) over long periods, with deep multi-year drawdowns along the way. Past returns don't guarantee future ones.
What does my breakeven return mean?
It's the assumed annual return at which both paths end with the same balance — mathematically it sits almost exactly at your loan's interest rate. Expect the market to beat that number (with risk), and investing wins; otherwise the guaranteed payoff wins.
What does this calculator ignore?
Taxes (mortgage-interest deductions, capital-gains and dividend taxes), investment fees, PMI, and the behavioral value of being debt-free. The return slider is your tool for building those haircuts into the assumption.