Mortgage vs Investments Calculator

50,000 invested at 7% for 25 years grows to about 271,000, while the same 50,000 put toward a 4% mortgage is worth about 133,000 in equivalent terms — a gap of about 138,000. The investment side shows the higher figure whenever the expected return is above the mortgage rate.

Run it with sensible defaults

Using lump sum of 50,000, mortgage rate of 4%, investment return of 7%, horizon of 25, the calculation works out to 138,079.82. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Lump Sum, Mortgage Rate, Investment Return, and Horizon — do not pull with equal force. The rate and the time horizon usually dominate — compounding means a small change in either reshapes the final figure more than a similar shift in contribution size. Doubling one input at a time shows which one moves the result most.

How the math works

The lump sum's future value at the investment return is compared with its future value at the mortgage rate. Growing it at the mortgage rate is a proxy for the value of paying down debt, not the actual interest saved, which depends on the amortisation schedule.

Testing the assumptions

The expected investment return is the biggest unknown. Trying a return below the mortgage rate flips which side shows the higher figure, and a smaller rate gap narrows the difference sharply over long horizons — compounding amplifies even a one-point change.

What this doesn't capture

The comparison is pre-tax and ignores fees, so it leaves out tax on investment gains, any tax relief on the mortgage, dealing costs, and early-repayment charges. It also assumes steady annual returns with no volatility, and treats the lump sum as equally available to either path. Real markets and rate changes will move both sides.

Worked example

Suppose you have 100,000 in savings, a mortgage balance of 300,000 at 3.5%, and 20 years remaining on the term. You expect to earn 5.5% annually on investments.

• Path A (Pay down mortgage): the 100,000 put against the 3.5% mortgage is valued at its equivalent future amount, about 199,000 after 20 years.
• Path B (Invest the 100,000): at 5.5% annual growth, the lump sum grows to about 292,000 after 20 years.

The difference between investment return (5.5%) and mortgage rate (3.5%) is 2 percentage points. Over two decades that compounds into a gap of roughly 93,000, with the investing path showing the higher figure. The calculator models both paths and displays the spread.

When this calculation matters

This model applies when you have a lump sum and face a genuine either/or decision: redirect it toward mortgage principal, or place it into investments (stocks, bonds, savings products, or other vehicles). It's most useful when:

• Mortgage and investment rates differ significantly
• You have flexibility in timing and don't face immediate pressure to choose
• Your mortgage allows overpayments without penalty
• You have clarity on your expected investment returns
• You're comparing strategies over a multi-year horizon

What the result shows and does not show

The calculator estimates the mathematical outcome of each path — how much capital you accumulate under each strategy. It does not account for:

• Tax on investment gains or interest relief on mortgage payments
• Changes in interest rates during the period
• Liquidity: money in investments may be less accessible than equity in property
• Personal preference for debt reduction over asset growth
• Volatility or timing risk in investment markets
• Fees, spreads, or transaction costs on either strategy

The result is an illustration for educational purposes. Actual outcomes depend on real market performance, rate movements, and individual circumstances.