Pay Off Your Mortgage Early or Invest? Tested on 69 Mortgages

You've got some spare money each month. You can send it to the mortgage and be debt-free years early. Or you can invest it and hope it grows faster than the mortgage costs you.

Most advice picks a side. We'd rather test it. We took today's US mortgage rate and ran the choice through every 30-year stretch of US market history since 1928.

What paying extra actually does

Every mortgage payment is part interest and part loan. Early on, most of it is interest. Any extra you pay goes straight to the loan, so the next month's interest is charged on a smaller balance.

Take a $300,000 mortgage over 30 years at 7.40%, the US average for a 30-year fixed rate on 2026-10-08. The normal payment is $2,077 a month. Paid on schedule, you'd hand over $447,770 in interest on top of the $300,000.

Now add $500 a month. The loan is gone in 17 years and 2 months instead of 30 years. You pay $230,424 in interest, so you save $217,346. The extra you put in adds up to $103,000.

A shorter mortgage does the same thing by design. On 2026-10-08, the US average 15-year fixed rate was 6.73%, against 7.40% for 30 years. The payments are higher, but you pay far less interest.

A one-off payment works the same way. Put $10,000 on that mortgage in the first month and you save $71,153 of interest. The loan ends 3 years and 3 months early.

The rate matters a lot. On the same loan at 3%, the payment is $1,265, and $500 extra saves $64,227. That's a lot less than $217,000, because there's less interest to save.

Paying extra is a guaranteed return

Here's the simplest way to think about it. Every dollar you put on a 7.40% mortgage earns 7.40% a year, because that's the interest you no longer pay. There's no risk, and no tax on it either.

Compare that with other safe places for the money. A 10-year US Treasury paid 5.24% on 2026-10-09. So right now, paying down the mortgage beats the safest investment by about 2.2 points a year.

Stocks have done better than that over long periods, but they don't promise anything. So the real question is: how often did investing beat a sure 7.40%?

How we tested it

Picture two households. Each takes out a $300,000 mortgage over 30 years. Each has the same $500 a month to spare. They spend exactly the same amount every month for 30 years.

• The payer puts the $500 on the mortgage. Once it's paid off, they invest the whole amount, the old payment plus the $500, every month.
• The investor pays the normal mortgage and invests the $500 every month from day one.

After 30 years, both own their home outright. So whoever has the bigger investment pot made the better choice. We ran it for every start year from 1928 to 1996. That's 69 mortgages, using real US stock and bond returns.

We kept the mortgage rate at today's 7.40% for every start year. That shows what today's choice would have faced, not what past borrowers paid. We tried three ways to invest: all stocks (the S&P 500), 60/40 (60% stocks, 40% bonds) and all bonds (10-year Treasuries).

At 7.40%, investing usually won, but not with bonds

With all stocks, investing won 59 times out of 69. In the typical case the investor finished with 1.53× as much as the payer. That's the case for investing, and it's a strong one.

With 60/40 it was much closer. Investing won 49 times and lost 20. With bonds, it lost 50 times out of 69. A safe portfolio just doesn't earn enough to beat a 7.40% mortgage.

When did stocks lose? For mortgages taken out in 1954-59 and 1990-93. Timing explains it. The payer owns the home after about 17 years and then starts investing a much bigger amount each month.

For a 1950s mortgage, that big money went in from the early 1970s, just ahead of the long 1980s-90s boom. The investor's money went through the flat years from the late 1960s to 1982 instead. For an early-1990s mortgage, the payer started investing around 2008, buying cheap during the crash.

Your mortgage rate decides it

So far we've used today's rate. Here's the same test at other rates.

At 3%, investing in stocks or 60/40 won every single time. Even the worst stock result left the investor with 1.58× the payer's pot. If you locked in a low rate, like the 2.96% US average of 2021, there's little case for paying it off early.

As the rate rises, the guaranteed return gets harder to beat. We found where paying off starts to win more than half the time. For 60/40 it's a rate of about 8.6%. For all stocks it's about 10.8%. For bonds it's 5.0%, which today's rate is well above.

Rates have been far higher. The US 30-year average hit 16.64% in 1981. That's well above every break-even we found, so paying off early would have been an easy call.

Taxes and fees tilt it further

Our test assumed no tax and no fees, as in a tax-free account. If you invest in an ordinary taxable account, tax takes some of your return each year. Fund fees take some too. Paying off the mortgage has neither.

We reran the test at 7.40% with a 1% yearly drag on the investor's pot. Stocks won 50 of 69, down from 59. 60/40 won 38, down from 49. So with a 1% drag, 60/40 investing won only just over half the time.

In the US, mortgage interest can be tax-deductible, which used to be a common argument for keeping the mortgage. But you only get it if you itemise deductions, and most people don't any more. In 2022, only 9.5% of US tax returns itemised, down from 30.6% in 2017. Tax rules differ in every country, so check yours.

What the numbers leave out

The maths isn't the whole decision. A few things matter just as much.

• You can't spend your house. Money in the mortgage is locked up until you sell or borrow against it. Money in investments can be sold in days if you lose your job.
• Being debt-free feels good. A paid-off home means much lower bills. That makes retirement, a job loss or a pay cut much easier to handle.
• Investing only works if you stay invested. The investor in our test never sold, even in 1929 or 2008. Plenty of real people do sell in a crash, and that's what usually costs them.
• Rates can change. If rates fall a lot, you might refinance at a lower rate, and the case for paying extra gets weaker. If your rate is variable, it can rise.

Do these things first

Whichever you choose, a few steps usually come before either one.

• Pay off expensive debt first. A credit card at 20% beats any mortgage and any investment. Our pay-off-debt-or-invest article covers this.
• Build an emergency fund. A few months of spending in cash means you won't need to borrow if something goes wrong.
• Take any free money on offer. If your employer adds to your pension or retirement account when you do, that's an instant return no mortgage can match.
• Use tax-free accounts. Your country's version of a tax-advantaged account makes investing much more competitive, as the drag test showed.

Outside the US

Mortgages work differently in many countries. In the UK, many people fix their rate for a few years at a time, and paying too much extra during that time can trigger an early repayment charge. Many lenders allow some overpayment without it. For example, Principality Building Society lets you overpay up to 10% of the balance each year. Check your own mortgage offer.

In the UK and Australia, some lenders offer an offset account. Your savings sit next to the mortgage, and you're only charged interest on the difference. You get the same guaranteed return as paying extra, and you can still take the money out.

So, should you pay off your mortgage early or invest?

Start with your mortgage rate. If it's low, around 3-4%, investing has won almost every time in US history. Keep the cheap mortgage and invest the rest.

If it's high, like today's 7.40%, paying extra is a strong choice. It beats every safe investment: bonds lost 50 of 69 races against it. Investing in 60/40 still won 49 times and stocks won 59. But both lost in some stretches, and taxes and fees cut their lead.

Many people split it. Some extra on the mortgage, some invested. You get a guaranteed return on part of the money and growth on the rest, and you're not betting everything on one answer.

If you're working out where your money should go first, Stage 1 of the free course covers goals, emergency funds and building a solid base.

What this test can't tell you

• We used today's 7.40% rate for every start year. Real past borrowers paid very different rates, and many refinanced when rates fell.
• We used yearly US returns, spread evenly across each year's months. Real months were bumpier.
• There were no taxes, fees or trading costs in the main test. The 1% drag test shows how much those can matter.
• US stocks from 1928 to 2025 did better than most of the world's markets. Weaker returns would favour paying off the mortgage.
• The 69 stretches overlap, so they aren't 69 separate experiments. Treat the counts as a guide, not as odds.