Mortgage payoff vs invest
The decision is not just rate vs return. Itemizing, marginal tax rate, and your need for predictable vs expected return all matter.
Effective mortgage rate
6.50%
Expected return
7.00%
Recommendation
Investing is the higher-EV move on expectation
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FAQ
- Why does itemizing matter?
- If you itemize and deduct mortgage interest, your effective mortgage rate is reduced by your marginal tax rate.
- What about peace-of-mind?
- Eliminating a mortgage produces a fixed-rate, predictable saving; investing returns are an expected value. Some people rationally accept a lower expected return for the certainty of being debt-free.
- Should I keep my mortgage and put cash in bonds?
- If your mortgage rate is higher than the after-tax yield on safe bonds, this becomes a predictable loss. Run the math.
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Educational guidance only. Not legal, tax, or individualized investment advice. We do not recommend individual securities or guarantee outcomes.