Should you pay off a 6% mortgage or invest?
With a 6% mortgage and a 7% expected investment return, investing the extra money ends roughly $52,524 ahead after 30 years. But that's only the math on averages — paying off a mortgage is a guaranteed return and buys real peace of mind.
Why the mortgage rate decides it
Paying off a mortgage is a guaranteed return equal to the mortgage rate. Investing is an expected return with risk. So the comparison is simply 6% guaranteed vs ~7% (risky) expected:
- When the mortgage rate is well below your expected return (like 6% vs 7%), investing usually wins on average — your money compounds faster than the loan costs.
- When the mortgage rate approaches or exceeds your expected return, paying it off wins — and it's a certain win, with no market risk.
- Guaranteed vs risky matters. A paid-off house lowers your fixed costs and sequence-of-returns risk in retirement. Many people rationally choose the guaranteed return even when investing edges it out on paper.
Before you decide
A few things this comparison assumes you've already handled: capturing your full 401(k) match (an instant ~100% return that beats both), paying off any high-interest debt (credit cards dwarf a mortgage rate), and keeping an emergency fund. Money locked in home equity is hard to access without a sale or a HELOC — so don't pay down the mortgage with money you might need.
Assumptions: $450k home, 20% down, 30-yr term, an extra $12,000/yr toward principal, 7% investment return, 3% inflation, single filer. Mortgage interest is only deductible if you itemize — most people take the standard deduction, so this treats it as non-deductible. Model your own numbers in the calculator.
What has to come before extra mortgage payments
Before a single extra dollar goes toward a mortgage in this range, run the ladder of higher-priority returns first. Sending money to the house too early is a common, costly mistake.
- Capture the full employer 401(k) match. A dollar that earns an immediate match is an instant, near-certain return no mortgage rate can touch — skipping it to prepay leaves free money behind.
- Clear any high-interest debt, credit cards especially, whose rates dwarf a mortgage. That is the guaranteed payoff to chase first.
- Fund an emergency reserve. Extra principal is locked in the walls; a cash cushion is what keeps a rough month from turning into new high-rate debt.
Only after those are handled does the mortgage-versus-invest question become live. At that point a rate this high is a genuinely attractive guaranteed return, and prepaying is a defensible choice — but it belongs after the match, not instead of it. The order matters more than the rate: secure the free and near-free returns first, then decide where the leftover surplus does the most good.
Common questions
Should I pay off a 6% mortgage or invest?
On average, investing wins by about $52,524 over 30 years because a 7% expected return beats the 6% guaranteed by paying it off. But paying off is guaranteed and risk-free, which many people rationally prefer.
Is it worth paying off my mortgage early?
Financially it's worth it when your mortgage rate is at or above your expected after-tax investment return. Below that, investing usually builds more wealth — though a paid-off home reduces risk and fixed costs, which has real value beyond the math.
What should I do before paying extra on my mortgage?
Capture your full 401(k) match, clear high-interest debt (credit cards), and hold an emergency fund first — each of those beats extra mortgage payments. Only then does paying down a low-rate mortgage compete with investing.