🇺🇸 United States · Illustrative scenario

Prepay the mortgage or invest the difference?

A homeowning family, 42 — San Jose, CA, USA

This is an illustrative scenario, not a real customer or testimonial. It's a composite built to show how the tools apply to a realistic situation in United States — the persona and exact figures aren't a specific real person's data.

The situation

A $540,000 mortgage balance at 6.1%, with $1,500/month in discretionary cash that could go toward extra principal payments or into a taxable brokerage account instead — the kind of decision usually settled by gut feeling rather than the actual numbers.

The approach

Compared the mortgage's guaranteed, risk-free "return" (avoiding 6.1% in interest) against a taxable investment scenario at a more conservative assumed long-term return, accounting for the mortgage-interest deduction cap and the fact that investment returns aren't guaranteed the way a payoff is.

The outcome

Given the mortgage rate was close to the conservative-case investment assumption, split the difference — an extra $700/month to principal, $800/month invested — rather than an all-or-nothing choice, reducing loan term by several years while still building a taxable investment position.

Tools used

Home Loan Prepayment calculator
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