Extra Mortgage Repayments vs Investing Calculator
Should spare cash go into the mortgage or the market? Paying down a loan is a guaranteed, tax-free return equal to your interest rate, which is a higher bar than it first appears - an investment has to beat it after tax and after risk.
Your details
Comparison
| Extra per month | $1,000 |
| Compared over | 10 years |
| Total contributed either way | $120,000 |
| — | |
| Loan interest saved over full term | $229,807 |
| Loan paid off earlier by | 9y 0m |
| Balance after 10 years with extra | $294,749 |
| Balance after 10 years without | $459,521 |
| Debt reduction achieved | $164,772 |
| — | |
| Portfolio value | $154,289 |
| Investment gain | $34,289 |
| Assumed return 4.88% after tax at your marginal rate | 8.00% |
| Effective return from paying down debt Guaranteed and tax-free | 6.10% |
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Frequently asked questions
What return does paying down the mortgage give me?
Exactly your interest rate, guaranteed and tax-free. At 6.1% that is equivalent to a pre-tax return of about 9% for someone on a 32% marginal rate. Very few risk-free investments come close, which is why paying down non-deductible debt is usually the strongest option available.
Does it change for an investment loan?
Yes. If the interest is deductible, the after-tax cost of the debt is much lower - 6.1% becomes about 3.7% at a 39% marginal rate. That lowers the hurdle an investment has to clear, which is why the standard advice is to pay down your own home first and leave deductible debt alone.
What about an offset account?
An offset gives the identical interest saving as an extra repayment but keeps the money accessible, and on an investment loan it preserves the deductibility of the debt in a way that redrawing does not. If you are undecided, the offset is usually the better default.
General advice warning: This calculator provides general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice.
Results are estimates based on the inputs and assumptions shown. Any interest rate used is an example and is not an offer of credit. Speak to a licensed credit representative before acting on these figures.