Invest or pay off mortgage early? (answered with math)
June 29, 2026
r/NewbHomebuyer
I'm going to run two scenarios on a couple of spreadsheets.
Invest vs pay extra toward the mortgage.
average mortgage rates today are at 6.52%
I'll peg the annual investment returns at 7%.
I know, SP500 has outperformed that historically. That's fine. 7% is a standard baseline used by investment firms. It seems conservative though. But what's also interesting is that the projection for the SP500 over the next 10 years will be around 6.5%
That said, I'll stick with 7%
I could make this short and say "Whatever % is greater, put your money toward that and you'll win."
7% > 6.5% so invest in 7%
But let me show you the math and you might come away with a different answer.
$400k loan amount, no PMI, 6.52% rate and we're only dealining with P/I
First, let me give you a strategy that we'll implement:
Bi-weekly vs monthly
If you pay toward your mortgage every two weeks to match your income deposit schedule, then you'd pay 13 payments per year instead of 12. (52 weeks in a year divided by 2 = 26, divided by 2 again = 13 payments)
Here's how soon you'll pay off the mortgage:
| Year | Ending Balance |
|---|---|
| 1 | $392,935 |
| 2 | $385,396 |
| 3 | $377,350 |
| 4 | $368,764 |
| 5 | $359,601 |
| 6 | $349,822 |
| 7 | $339,386 |
| 8 | $328,250 |
| 9 | $316,365 |
| 10 | $303,681 |
| 11 | $290,145 |
| 12 | $275,700 |
| 13 | $260,285 |
| 14 | $243,833 |
| 15 | $226,277 |
| 16 | $207,541 |
| 17 | $187,546 |
| 18 | $166,208 |
| 19 | $143,436 |
| 20 | $119,134 |
| 21 | $93,200 |
| 22 | $65,524 |
| 23 | $35,987 |
| 24 | $4,467 |
| 25 | $0 |
You'd save 5.8 years and about $117k in interest
Let's say you kept your discipline and invested your mortgage payments toward a 7% investment account, here's how that would look over 30 years:
| Year | Investment Balance |
|---|---|
| 1 | $0 |
| 2 | $0 |
| 3 | $0 |
| 4 | $0 |
| 5 | $0 |
| 6 | $0 |
| 7 | $0 |
| 8 | $0 |
| 9 | $0 |
| 10 | $0 |
| 11 | $0 |
| 12 | $0 |
| 13 | $0 |
| 14 | $0 |
| 15 | $0 |
| 16 | $0 |
| 17 | $0 |
| 18 | $0 |
| 19 | $0 |
| 20 | $0 |
| 21 | $0 |
| 22 | $0 |
| 23 | $0 |
| 24 | $0 |
| 25 | $28,156 |
| 26 | $64,106 |
| 27 | $102,573 |
| 28 | $143,733 |
| 29 | $187,774 |
| 30 | $234,898 |
After 30 years of bi-weekly discipline, you'll end up with about $235k in retirement.
Let's compare that to strategy B:
pay the minimum toward the mortgage, invest the 13th yearly payment at 7%
| Year | Mortgage Balance | Investment Balance |
|---|---|---|
| 1 | $395,546 | $2,614 |
| 2 | $390,793 | $5,411 |
| 3 | $385,720 | $8,403 |
| 4 | $380,307 | $11,605 |
| 5 | $374,530 | $15,031 |
| 6 | $368,365 | $18,697 |
| 7 | $361,785 | $22,620 |
| 8 | $354,764 | $26,817 |
| 9 | $347,271 | $31,308 |
| 10 | $339,274 | $36,114 |
| 11 | $330,741 | $41,256 |
| 12 | $321,634 | $46,757 |
| 13 | $311,915 | $52,644 |
| 14 | $301,543 | $58,943 |
| 15 | $290,474 | $65,683 |
| 16 | $278,662 | $72,895 |
| 17 | $266,056 | $80,611 |
| 18 | $252,603 | $88,868 |
| 19 | $238,246 | $97,702 |
| 20 | $222,925 | $107,155 |
| 21 | $206,574 | $117,270 |
| 22 | $189,125 | $128,093 |
| 23 | $170,504 | $139,673 |
| 24 | $150,631 | $152,064 |
| 25 | $129,424 | $165,322 |
| 26 | $106,791 | $179,508 |
| 27 | $82,638 | $194,688 |
| 28 | $56,863 | $210,930 |
| 29 | $29,355 | $228,309 |
| 30 | $0 | $246,904 |
So there you have it.
investing wins by $11k.
The amount isn't a ton because the difference in rates is 0.5%
But if investment returns were closer to 10% (which many argue is the case for the SP500) then the gap would be about $180k
human behavior
Pulling your money out early.
withdrawing money from a retirement is easier than accessing your home's equity.
One is a few clicks and signatures. The other is a loan process.
Hardship withdrawls are easy to justify. A home's equity is more sticky.
simplification
paying off your mortgage is a guaranteed rate. I can see myself wanting to simplify things as I get older. Spreadsheet math isn't as important if your goal is to simplify everything.
stress
Does a larger retirement balance give you more peace of mind?
Or it could go the other way around:
The relief you feel when paying off that mortgage might make you feel invincible. Like you could get hit with anything and know that your monthly necessities are low because you don't have to make the mortgage payment.
I could see that freeing you up for a possibly better lifestyle. You aren't chained to a specific job because you don't have to pay the mortgage anyore.
You can take a less demanding job now.
go be a ballroom dancer, or write that novel you've been putting off. ;)
curious what your thoughts are on this topic
-Sam
I write first time buying tips and posts at r/NewbHomebuyer
Originally shared by u/SamTMortgageBroker in r/NewbHomebuyer — view the original thread.