Mortgage vs Invest Calculator
Compare paying extra into your mortgage vs investing that money in shares/ETFs. See after-tax wealth at your chosen horizon.
Disclaimer
This calculator provides estimates for general information purposes only. Results should not be relied upon as professional financial, tax, or legal advice. Tax rates and thresholds are based on publicly available ATO data and may change. Always consult a qualified tax agent or financial adviser for advice specific to your circumstances.
Frequently Asked Questions
Should I pay off my mortgage or invest?
Doesn't investing always win over the long term?
What about offset accounts?
Do tax considerations change the answer?
What is Mortgage vs Invest?
Side-by-side comparison of two strategies for surplus monthly cashflow: (A) extra repayments on your mortgage, then invest the freed-up payment after payoff, vs (B) minimum mortgage payments and invest the surplus immediately. Computes after-tax wealth at your chosen horizon.
How this calculator works
Enter your mortgage balance, rate, remaining term, monthly extra budget, expected investment return, marginal tax rate, and time horizon. The simulator runs both scenarios month-by-month: Strategy A amortises the mortgage faster with extras, then invests the freed-up payment for remaining months. Strategy B keeps minimum payments and invests the extras throughout. Both apply CGT at the end (50% discount × marginal rate on gains).
The Math: Risk-Free vs Risk-Adjusted Returns
Extra mortgage repayments give a guaranteed risk-free return equal to your mortgage rate. Investments give higher EXPECTED returns but with volatility. The key question: does your expected after-tax investment return exceed your mortgage rate by enough to justify the volatility? At a 32% marginal rate with 50% CGT discount, an 8% pre-tax investment return becomes ~6.7% after-tax — only marginally above a 6.10% mortgage rate.
Owner-Occupier vs Investment Loan
OWNER-OCCUPIER: mortgage interest is NOT tax-deductible. Compare your mortgage rate vs your after-tax investment return. INVESTMENT LOAN: mortgage interest IS deductible against rental income (or other income via negative gearing). The effective after-tax interest cost is reduced — typically you DON'T want to pay down deductible debt; instead pay down non-deductible debt and let the deductible balance ride.
Behavioural Considerations
Mathematics often suggests 'invest' marginally wins, but BEHAVIOURALLY most people benefit from paying down their mortgage. Reasons: (1) Forced savings vs optional investing, (2) emotional security of debt freedom, (3) reduced stress during downturns, (4) no 'panic selling' temptation, (5) lower required income makes job loss less catastrophic. Studies suggest people who pay off mortgages have higher long-term net worth even when investing 'should' have won mathematically.
The Offset Account Compromise
Offset accounts give the mathematical equivalent of paying down the mortgage (your mortgage rate, tax-free) WITH liquidity preserved. Most major Australian banks offer 100% offset on variable home loans. Many financial planners recommend filling the offset BEFORE either extra repayments or external investing — best of both worlds: same interest savings as repayments, instant access if needed.
When 'Invest' Clearly Wins
(1) You're young (30+ year horizon) — equity returns compound through downturns. (2) Salary sacrificing into super (15% contribution tax beats most strategies). (3) Investing in deductible-debt-funded structures (debt recycling, investment loans). (4) Your mortgage rate is very low (e.g. fixed at 2-3%). (5) You have full emergency fund and substantial super already.
Updated for the 2025-26 financial year (1 July 2025 to 30 June 2026).
Official Sources
All calculations are performed in your browser — your data never leaves your device. Results are for general guidance only and should not be considered professional financial advice.
Built and maintained by Konstantin Iakovlev. Data sourced from the ATO and official Australian government sources.