Pay off the mortgage early or invest? Calculator with risk
Compare putting an extra monthly amount into early repayment with investing it — the same cash out each month, the guaranteed loan rate against an uncertain market return.
Investing has the higher expected result, with the risk shown. In 39% of simulated markets, investing ends with less money than prepaying.
Wealth at the loan's original end (25 yr)
| Option | Expected | Bad markets (10 %) | Median | Good markets (90 %) |
|---|---|---|---|---|
| Prepay | € 167.547 | € 118.738 | € 160.570 | € 222.227 |
| Invest the extra | € 203.874 | € 100.960 | € 179.884 | € 323.243 |
| Investing minus prepaying | +€ 36.327,39 | −€ 39.641,91 | +€ 15.170,32 | +€ 132.226 |
Both options spend the same cash every month until the original end date; once the loan is repaid, the whole amount is invested. Percentiles come from simulated market paths.
Assumptions
- Investment return after tax
- 6,00%
- Return at which both are equal
- 4,07%
- Interest without prepaying
- € 116.702
- Simulated market paths
- 4.000
- Prepaying earns exactly the mortgage rate, risk-free and tax-free.
- Check your loan contract for prepayment fees.
Not modelled: prepayment fees, tax relief on mortgage interest, rate resets on variable loans. Check your loan contract.
- This is general, rule-based analysis, not personal investment advice. You make the decisions; consider a licensed adviser for your situation.
- Taxes depend on your residence and status; figures use a simplified model. Check with a tax adviser.
- Past performance does not predict future results. Backtests are hypothetical and usually look better than live results.
How the calculation works
Both options spend the same cash every month until the loan's original end date. Prepay: the extra goes to the loan until it is repaid, then the instalment plus the extra is invested. Invest: the loan runs to term and the extra is invested from the first month.
Prepaying earns exactly the loan rate, risk-free. Investing earns an uncertain return: we simulate thousands of market paths with the return and volatility you enter and show how often investing ends behind — and by how much in a bad market.
The break-even return is the investment return at which both options end equal. If your realistic after-tax return is close to the loan rate, liquidity and peace of mind usually decide.
Questions and answers
Should I prepay my mortgage?
This tool cannot decide for you. For the numbers you enter it shows the guaranteed saving of prepaying next to the expected gain and the shortfall risk of investing. Check prepayment fees and keep an emergency fund first.
Why can investing lose even with a higher expected return?
Because returns vary. Over 10–15 years a stock portfolio can end below a fixed 4 %; the shorter the remaining term, the higher that chance. The '10 %' column shows a bad-market outcome.
What is the 'save in cash' option?
If you enter a cash savings rate, a third option saves the extra in cash and repays the loan in one go once the savings cover it — keeping the money available until then.
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