Mortgage Overpayment vs Investing: Run the Numbers Before You Decide
See exactly when you will be mortgage-free.
Frequently Asked Questions
- At what mortgage rate does investing beat overpaying?
- Historically, the break-even is around 5-6% mortgage rate vs 7-8% pre-tax investment returns. If your mortgage rate is below 5%, investing the extra money likely wins long-term. Above 6%, overpaying likely wins. Between 5-6%, the strategies are roughly equivalent after taxes.
- Should I max out my 401(k) before overpaying my mortgage?
- Almost always yes. A 401(k) with employer match is an instant 50-100% return—no mortgage overpayment can match that. Even without a match, the tax deferral on a 401(k) is worth 1-3% annualized over a taxable account. Max the 401(k) first, then decide between taxable investing and mortgage overpayment.
The Eternal Question: Mortgage or Market?
📊 Based on historical market data and amortization mathematics. See our methodology page for assumptions and limitations.
Financial advisors split on this question because the answer changes with mortgage rates, market conditions, and your personal situation. At 3% mortgage rates (2020-2021), investing was the clear winner. At 7% (2023-2026), the math flips. Our calculator shows both scenarios side-by-side so you can make the decision based on numbers, not headlines.Real Numbers: 6.5% Mortgage vs 8% Market Returns
Scenario: $200,000 remaining on a 30-year mortgage at 6.5% with 25 years left. You have $300/month extra to either overpay or invest. Overpayment strategy: $300/month extra pays off the loan in 17 years instead of 25, saving $82,000 in interest. After the loan is paid, you invest the full former mortgage payment ($1,264 + $300 = $1,564/month) for the remaining 8 years at 8%. Final net worth: ~$210,000 in investments + paid-off house. Investing strategy: Invest $300/month for 25 years at 8% (pre-tax, 6% after 25% tax). Final net worth: ~$205,000 in investments + paid-off house. Result: Nearly identical. The overpayment strategy wins slightly due to tax-free returns and forced discipline. At 7% mortgage rate, overpayment wins by a wider margin. At 5%, investing wins clearly.
Check current mortgage rates — could a refi change your overpayment math?
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