PAY OFF MORTGAGE OR INVEST: How to Make the Right Choice


A mortgage is an agreement between a lender and a borrower to buy or refinance a home without all of the cash up-front. If you have reached this sort of agreement with a lender, you’d be left between paying off your mortgage at once and investing the remaining into some other business. Nevertheless, you’ll need to make a better decision when faced with such situations. Now, the pressing question surrounding mortgages is: “Is it a better decision to pay off my mortgage or invest”? This post will enlighten you on the best decision on whether to pay off a mortgage or invest with respect to the view of Dave Ramsey, the American financial personality. More than that, you’d learn about the 2022 calculator to help calculate your mortgage and be able to pay it off.

Let’s get started!

Pay Off Mortgage Or Invest

Firstly, a mortgage is an agreement between you and a lender that gives the lender the right to take your property when you fail to repay the money you borrow, plus the interest. Mortgage loans are in use especially to buy a home or to borrow money against the value of a home you already own.

Secondly, to invest means to put (money) into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit at the end of the investment or business. Investment also is the act of allocating resources, mostly money, with the expectation of generating an income or profit.

Deciding Between Paying Off a Mortgage And Investing

Now stuck between the option to pay off a mortgage or to invest your money, most people find it difficult to do. To decide whether to pay off your mortgage or invest depends entirely on your financial circumstances or situation, the loan’s interest rate, and how close they are to retirement. To pay off your mortgage early, especially the interest is a good decision. Likewise, investing your money for a good profit.

Although paying off a mortgage is good, but, consider also, other factors such as the tax-deductibility of mortgage interest and low loan rates. Investing that money can generate higher returns than the loan’s interest cost, markets also come with the risk of losses. Mortgage payments are of two components; interest on the loan and also principal amount. This goes to paying down the total outstanding balance.

Is It Better To Pay Off Mortgage Or Invest 

“Is it better to pay off a mortgage or invest” is probably a regular question with people dealing with mortgages. Dave Ramsey, the American’s financial personality is of the view that paying off a mortgage shouldn’t be the first step, neither should investment. However, he suggests that you pay off all of your other debts first, and then start putting 15% of your income into mutual funds. To make a good decision on what to do between investing and paying off a mortgage, you need to make good market research and analysis first.

Let’s take a quick look on how mortgage works including its interest rate and how to calculate the loan:

 Payment Number Monthly PaymentPrincipal Interest Loan Balance Remaining
 1 $898.09$314.76 $583.33 $199,685.24
 109 (10 years) $898.09$431.10 $499.99 $159,679.65
 229 (20 years) $898.09$611.45 $286.64 $97,665.59
301 (25 years)$898.09$754.10$143.99$48,613.86
360 (last payment)$898.09$895.48$2.610.00

The table above is showing five loan payments at different intervals for a 30-year mortgage with a starting balance of $200,000. And now, a fixed interest rate of 3.5%. Showing how the larger portion of the fixed monthly payment is towards the payment of interest for the first 10 years. However, as time passes by, the percentage of the monthly payment that goes towards interest versus principle is reversed.

The portion of the loan payment that applies to principal and interest changes over the years. This is because the loan balance is higher in the early years and smaller in the later years. This also makes sense since the interest amount is higher early on and there’s a larger loan balance outstanding.

As the monthly payments eventually reduce the outstanding loan, there’s less interest now, leading to a smaller portion of each payment applied towards interest and more towards the principal. In this case, like the example stated above, it’s best to pay off your mortgage first. 

Pay Off a Mortgage Or Invest Calculator

There are a lot of institutions offering a mortgage calculator to help calculate the debt and further decide whether to pay it off at once or to invest your funds. However, your decision to invest or pay off a mortgage should not be entirely dependent on this calculator as it is not 100% reliable. 


  • Current Mortgage Balance: $
  • Current monthly payment (principal + interest): $
  • Mortgage interest rate (APR): %
  • Potential investment return rate (APY): (1 – 4% for savings acct., 4 – 8% stocks, etc.) %
  • Amount of monthly money to either invest or prepay: $
  • Length of loan: years


  • Total interest paid if you choose prepayment: $
  • Total interest paid if you choose investment: $
  • Balance of investment at loan maturity:  $

The information and the calculator itself are a self-help tool for your independent use and are not for investment advice. There is no guarantee of their applicability or accuracy in regard to your personal situation. Henceforth, in making decisions for your mortgage, visit a specialist or any other qualifying professional regarding all personal finance issues.

Pay Off Mortgage Or Invest In 2022

In 2022, It’s a question every savvy borrower thinks about, should I pay off my mortgage and be free from it? Or should I take the mortgage company’s money and invest in the stock market? Whichever way it is, you have to understand as an investor that “wins” depends on your investment horizon and tax situation.

For many people, their mortgage is their highest debt. It’s reasonable therefore if you’re considering to pay off your mortgage in 2022 rather than deciding to invest, especially if you have minimal other debt. While this may make sense in some circumstances, another school of thought proposes that you maintain paying your mortgage and invest the extra money in the stock market.

However, before you decide to invest more money or pay off your mortgage in 2022, make sure you have a sufficient emergency fund with several months’ worth of cash, as Dave Ramsey suggests. If you have credit card debt, attempt to pay that off as well; while a mortgage is a form of debt, it is often regarded as “positive” in comparison to credit card debt.

 If you have an emergency fund and don’t have high-interest debt, refinancing your mortgage with cash out and investing in the stock market or another vehicle with the potential for better returns is another option to explore if you have sufficient equity in your house.

What is the best decision? To pay off my mortgage or invest in 2022?

To pay off the mortgage or invest in 2022, is a bit tricky depending on your financial state. However, be sure in recent times that investing your money might be the option for you. Why? Usually, you get more benefits from stocks, due to a lower tax rate for stock gains. However, recent changes in the tax code give an edge to the 30-year fixed for many Americans.

The Tax Cuts and Jobs Act of 2017 have begun reducing the use of itemized deductions, like mortgage interest. This is because the standard deduction increased. Now, 82% of homeowners have standard deductions large enough that the mortgage interest deduction is not providing a tax benefit to them. Those who benefit from deducting mortgage interest have a tax bracket of 24%.

Stocks longer than a year are subject to long-term capital gains taxes, which for the majority of Americans, is 15%. This will work out thus: Say that both mortgages and stocks have a rate of return of 10% and the Tax affecting the mortgage rate at 24% would create a rate of return of 7.6% while the comparable stock return tax affecting at 15% is at 8.5%. In 2022, I hope you make the best decision of either to pay off your mortgage or invest with the illustration above.


To pay off the mortgage or invest your money is a tough problem to crack even while using a calculator. This is because most people make mistakes in calculation and thereby end up making the wrong decision. Whether to pay off your mortgage or to invest your money, both are important, so let’s use the calculator and be certain.

Retirement accounts like the 401(k), Roth IRA, and Traditional IRA accounts are tax exempt. While the money is invested, making them a great place to compound your money tax-free. If your investment goal is retirement accumulation, then know that the tax treatment of retirement accounts is a reason to consider investing in the market rather than paying down your mortgage.

Note that, if you’re investing in another retirement plan that you have not grown up on yet, your choices are easy. Point out the matching plan first. By participating in your matching program, you’ll achieve a 100% return ($1 becomes $2) even if you keep your dollars in cash. You’ll be beating both the stock market and whatever rate you have on your mortgage.

Given that most homeowners will be taking the standard deduction, the scenario where the S&P 500 is in a tax-exempt account is actually our original scenario where neither is tax affected. For the relatively few people getting a tax benefit from mortgages, this is the scenario where the S&P 500 wins more often than paying down your mortgage.

Use the pay off the mortgage or invest in the market calculator like this:

  • Current mortgage balance: $
  • Current monthly payment (principal + interest): $
  • Mortgage interest rate (APR): %
  • Potential investment return rate (APY): (1 – 4% for savings acct., 4 – 8% stocks, etc.) %
  • Amount of monthly money to either invest or prepay: $
  • Length of loan: years
  • Total interest paid if you choose prepayment: $
  • Total interest paid if you choose investment: $
  • Balance of investment at loan maturity:  $


Should I pay off my mortgage or invest my funds? This popular question is common among so many people. However, as we are discussing in this post, the decision is dependent on your financial state at the moment. 

If you’re in a situation where you keep asking yourself if you should pay off the mortgage or invest your money, then this post is your guide. When you take the necessary steps to make research and analyze the two concepts, then you are ready to make a choice.

What You Should Know

Firstly, you need to know how your mortgage works perfectly. Also, you should be aware of your interest rate and how it’s calculated. Have an idea of every detail of your mortgage and how it works for you. Moving forward, you have to make an analysis of the stock market— what are the current rates, and how much profit can you make within a period of time. The stock market is where you invest your money, so it’s only right you analyze it well.

Furthermore, the question “should I invest or pay off my mortgage” is a question answerable with calculations. From the year 1971-to 2013, it was profitable to pay down your mortgage because of the financial crisis affecting the stock rates at that period. While in recent times, investing your money is the best decision since rates are good and also taxes are favorable. If you are lucky to get a retirement tax-free account for your investment, then you have hit a jackpot.

Advice To Pay Off Mortgage Or Invest From Dave Ramsey

Dave Ramsey is a host of his radio show and as well a businessman from Tennessee. He holds classes for business and helps people to get out of debt. As of 2022, Dave Ramsey’s net worth is approximately $200 million.

He is best known for the syndicated radio program, ‘The Dave Ramsey Show. Dave Ramsey advises that rather than invest, you should first pay off your other debts including your mortgage. While some agree with him, others, on the other hand, don’t for reasons best known to them. 

Strategies To Pay Off A Mortgage Or Invest Include: 

The following are strategies propagated by Dave Ramsey to help you decide between having to invest your money and pay off a mortgage with it

  • Pay your mortgage off early
  • Your house payment should never exceed a quarter of your take-home pay and it should have a 15-year term
  • Pay off all of your other debt first and then start setting aside 15% of your money to stick in mutual funds
  • Have an emergency fund

However, there is continuous criticism about dave Ramsey’s strategies in pay off a mortgage or invest. And as well as how he did not use his own strategies. Henceforth, it is important you make good research on pay off your mortgage or invest not by dave Ramsey. But, for you, choose what works for you.

Is it smart to pay off mortgage?

Long-term savings from an early mortgage payoff can be substantial. You can become a homeowner more quickly by making even a tiny monthly extra payment. Before you contribute to your loan, be sure you have an emergency fund.

Why you shouldn’t pay off your house early?

Your cash reserves are low: According to Rob, you don’t want to pay off your mortgage at the expense of your reserves if you don’t want to wind up with a house and plenty of cash. In case of necessity, he advises building a cash reserve equivalent to three to six months’ worth of living expenditures.

What is the average age people are mortgage free?

Although borrowers anticipate paying off their mortgages at a median age of 59, 16% of survey respondents said they are unsure of when they will do so. In 2019, 9% of those questioned didn’t know, while 11% responded in 2020.

Am I better paying off my mortgage or saving?

In theory, it might be beneficial for you to save if you’re offered a higher interest rate on a savings account than the rate you pay on your mortgage. However, it would be advisable to pay off your mortgage first if the interest rate on it is higher than the amount you could get from a savings account.

Is it better to build wealth or pay off debt?

Once your debt is paid off, you may aggressively increase your savings by putting the full amount you were previously paying each month toward debt toward savings.


No one is telling you to make a decision based on someone else’s personal advice. This post is to give you an insight into the details of making a decision about paying off your mortgage or investing your money. Whichever works for you depending on your financial situation, do it.


Is there a disadvantage to paying off mortgage?

Paying it off typically requires a cash outlay equal to the amount of the principal. If the principal is sizeable, this payment could potentially jeopardize a middle-income family’s ability to save for retirement, invest in college, maintain an emergency fund, and take care of other financial needs.

Why is it not a good idea to pay off your mortgage?

Since rates are so low, devoting extra money toward paying your loan off early provides a very low return on investment (ROI). You could do much better financially by focusing on paying off higher-interest debt first, such as credit card debt, personal loans, or even car loans.

Should I pay off mortgage or invest Dave Ramsey?

I should note that Ramsey does advocate that you pay off all your non-mortgage debt first, build an emergency fund, then invest 15% of your income BEFORE you pay extra on your mortgage debt. Investing for retirement is NOT something that Ramsey advocates you delay in favor of fully focusing on paying off the mortgage

At what age should a mortgage be paid off?

While the average age borrowers expect to pay off their mortgage is 59, the number of survey participants who have no idea when they will pay it off at all stood at 16%. In 2019, 9% of those asked didn’t know and in 2020, 11% gave this answer.

Should I pay off my mortgage before selling my house?

If you plan to move and already have a mortgage on your current home, your first thought may be to pay off your mortgage early, so you’re free of your monthly payments. Though it isn’t necessary to pay off a mortgage before you sell your house, it may be a viable option depending on your situation

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