Pay Off the Mortgage or Invest?: the facts

1. Every extra dollar sent to a mortgage earns exactly the mortgage rate, guaranteed, and the saving is not taxed when the standard deduction is taken. Most households take it: for 2026 it is $32,200 on a joint return and $16,100 for a single filer, and the interest is deducted only above it.
2. The same dollar invested earns whatever the market gives, which may be more and may be less, and is not guaranteed in any year. The comparison is a sure return at the mortgage rate against an expected return that carries risk.
3. Example: $300,000 at 6% with 25 years left, and $500 a month extra. Sent to the mortgage, the extra clears it 8 years and 11 months early and saves about $112,299 of interest; with the freed payment then invested at 7%, the position at the original end date is about $363,745. Invested from the start at 7% instead, it is about $405,036.
4. When the expected return equals the mortgage rate, the two paths end equal to the cent, because a dollar of debt retired and a dollar invested compound at the same rate. The whole answer is the gap between the two rates and how sure you are of it.
5. The two paths differ in ways the arithmetic does not price. Money sent to the mortgage cannot be taken back without selling or borrowing; money invested can be sold. And the payoff is certain while the investment is not, which is worth something to most people even when the expected return is higher.
6. Deducting the interest lowers the sure return: a 6% mortgage deducted at 24% costs 4.56% after tax. That applies only to a household that itemizes, and only to the interest above the standard deduction.

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