Should I pay off my mortgage or invest?

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If you’re trying to decide whether to pay down your mortgage or invest your money, there are many things to consider. Paying down debt is a real step toward financial freedom, while investing may result in long-term financial growth. Both paths can strengthen your financial foundation, but they work in different ways.

Your best move depends on several personal factors, like current economic conditions, your financial goals, how comfortable you are with risk, and your timeline for needing the money for things like retirement or education costs. Understanding the key considerations behind each option will help you make the choice that's right for your situation.

We’ll break down the key concepts you need to know when making a choice between paying off your mortgage and investing.

Paying off your mortgage vs. investing: A breakdown

Paying off your mortgage and adding to your investment accounts are good ways to prepare for the future financially. Which one is right for you will depend on the situation.

Paying off your mortgage ahead of schedule can feel like a massive financial win. You own your home free and clear, save money on interest, and free up money in your monthly budget because you no longer have to make mortgage payments.

On the other hand, investing in the market could see your money grow, possibly rapidly if stocks perform well.

Deciding between the two requires considering factors like your risk tolerance, timeline, and, perhaps most importantly, mortgage interest rate.

In general, the higher the interest rate of your mortgage, the better it is to focus on paying off your loan. You can think of putting extra money toward your mortgage as getting a guaranteed return equal to its interest rate. For investing to be better, your investments would need to earn a greater rate of return compared to your loan’s rate.

These days, rates are high. While about 80% of homeowners had mortgage rates under 6%, that number was 92.7% in 2022. Nearly 20% of homeowners have rates over 6%, the highest percentage in more than a decade. Monthly payments are also relatively high, with the average monthly mortgage payment in October 2025 sitting at $2,329.

If you’re lucky enough to have a low rate, you might consider investing rather than putting extra cash toward your mortgage. Just be sure to compare your potential savings from extra mortgage payments to your projected investment returns.

Mortgage interest savings comparison

This table illustrates how much you could save by making extra payments on your monthly mortgage. It assumes a 30-year mortgage for $320,000 with a fixed interest rate of 6.5%.

You can use Rocket Mortgage’s amortization calculator to get a better idea of how extra payments would impact your mortgage, both in terms of how much you’d save in interest and how quickly you can pay the loan off.

Investment ROI comparison over 18 years

In the above example, making an extra payment of $500 per month meant paying off a 30-year mortgage in just 18 years and saving a bit more than $185,000. Investing may or may not be a better deal from a numbers perspective. It all depends on the rate of return your money earns.

This table shows how much you’d have after investing $500 per month for 18 years based on different rates of return.

If your rate of return is lower than the mortgage’s 6.5% rate, you wind up earning less than you’d save by paying off your mortgage. On the other hand, if your investments have a higher rate of return, you come out ahead by investing.

Pros of paying off your mortgage

There are many reasons to consider paying off your mortgage over investing, such as:

• Saving thousands in interest. By paying off your mortgage ahead of schedule, you can save a significant amount of money on interest.
• Lowering monthly expenses. Once you pay off your mortgage, you no longer have to pay that bill each month, reducing your monthly expenditures.
• Access to home equity. Paying down your mortgage means building equity in your home. You can later access that equity by getting a home equity loan¹ or line of credit.
• More financial flexibility. By eliminating your monthly mortgage bill, you’ll have more flexibility in your budget, letting you focus the money that would have gone toward your housing payment on other things.
• Peace of mind. Being debt-free can be a big win both financially and mentally, so if you feel burdened by debt, paying off your home loan can feel freeing.

Cons of paying off your mortgage

Paying off your mortgage isn’t right for everyone, so keep these drawbacks in mind.

• Reducing liquid savings. Putting extra money toward your mortgage means building equity rather than having more liquid cash available. You can access your equity, but it requires selling your home or getting a loan.
• Missing investment growth. In some cases, you can earn more money by investing than you’d save by paying off your home loan, so dedicating your extra money to mortgage payments can mean missing out on investment gains.
• Losing the mortgage interest deduction. You can deduct mortgage interest from your income when filing your taxes. If you use this deduction, paying off your loan means increasing your tax liability.
• Inflation makes fixed payments cheaper over time. If you have a fixed-rate mortgage, your monthly payments stay the same over time. As time passes, inflation makes those payments relatively cheaper, meaning it can be advantageous to keep the loan for a longer time.
• Possible early payoff fees: While Rocket Mortgage doesn’t charge a prepayment penalty, not all lenders are the same.

Choosing to invest² vs. paying off your mortgage

Depending on the interest rate of your mortgage, risk tolerance, and timeline, investing may let you come out ahead financially when compared to paying off your mortgage. If you can earn a higher rate of return than your mortgage’s interest rate, investing will be the better choice from a pure math standpoint, if not an emotional and peace of mind standpoint.

The lower your mortgage’s interest rate and the higher your risk tolerance, the easier it is to come out ahead by investing.

Over the past century, an investment portfolio composed of 100% of stocks has earned an average return of 10.5% per year. However, it has had some very down periods, including years when investors lost more than 40%.

A more conservative portfolio of 50/50 stocks/bonds has average returns of 8.8%, but still had years with losses exceeding 22%.

While past returns aren’t guarantees of future results and all investing is subject to risk, it’s not unreasonable to believe you will see at least somewhat similar performances, especially if you have a long, meaning decades-long, investing timeline.

If you’re willing to invest for the long haul and can tolerate the volatility and risk of investing, you might find that investing is the better choice.

Pros of investing your money

There are many reasons to consider investing instead of paying off your mortgage, including:

• Higher potential return. Depending on the interest rate of your mortgage, you could see higher returns from investing than from paying down your debt.
• Building long-term wealth. Investing is one of the best ways to build long-term wealth.
• More liquid assets. It’s easier to access and use money you’ve invested than it is to access your home equity, so investing keeps you more liquid.
• Diversified portfolio. Paying off your mortgage puts more of your money into a single asset: your home. Investing means you can build a more diversified portfolio.
• Employer retirement match (potentially). If your employer offers retirement account matching, investing can mean an immediate return because your employer puts more cash into your 401(k).

Cons of investing your money

Before opting to invest, consider these drawbacks.

• Market volatility and risk. All investing is subject to risk, and you could see years where your investment loses significant amounts. You need to be able to handle that risk and deal with volatility.
• Ongoing mortgage payment. Even if you choose to invest, you still have to make that mortgage payment every month, so you can’t focus too much of your money on investing.
• Slower debt payoff. If you opt to put extra cash into the market, it will delay paying off your debt. If you find debt to be a mental burden, that can be a big drawback.
• Taxes on gains. Investment returns are subject to tax, so you’ll need to consider how much tax you’ll owe when calculating whether investing or paying off debt is the better plan.
• Emotional stress during downturns. There have been years where the market has dropped by as much as 50%, which can be incredibly stressful. This is doubly true if you have significant amounts invested in the market and have to second-guess yourself after deciding to invest rather than pay off your debt.

Choosing to do both: Pay off your mortgage and invest

While it can seem like a binary choice, there’s nothing stopping you from hedging your bets and making extra mortgage payments while also investing in the market.

For example, if you have an extra $400 per month, you could choose to split it down the middle, investing $200 and adding $200 to each of your mortgage payments, or splitting it in whatever way feels right.

While doing both will slow your progress on both building a portfolio and paying off your loan as compared to committing to one or the other, it does mean you can get some of the benefits of both strategies while limiting each’s drawbacks.

You can also consider other strategies, such as focusing on investing but setting up biweekly payments so you wind up paying a bit more toward your mortgage each year. You can choose based on what’s right for your situation, finances, and risk tolerance.

Other considerations

Investing and making extra mortgage payments are just two ways you can put the money you have on hand to work.

Consider these other options for building a stable financial future.

• Build an emergency fund: Having a financial cushion can give you peace of mind. An emergency fund helps you cover surprise expenses – like car repairs, medical bills, or sudden job loss – without needing to take on more debt.
• Pay down other debt: If you’re carrying high-interest debt, such as credit cards or student loans, it may make sense to tackle those first. Reducing or eliminating those balances can free up cash in your budget and help lower your overall financial stress.

The bottom line: Pay off your mortgage, invest, or do both

Deciding whether to pay off your mortgage or invest can feel like a big decision. Both can benefit your financial future. Which is right for you depends on your mortgage interest rate, potential investment returns, and risk tolerance. Of course, nothing says you can’t split the difference and do a bit of both. You can do the math to figure out which is best financially or speak with a financial advisor who can help you find the right path forward.

If you’re looking for ways to get out of debt more quickly or reduce your mortgage payment, consider refinancing your loan with Rocket Mortgage³.

¹ Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher‑priced loans in the State of New York are subject to additional regulatory requirements. Additional restrictions apply. This is not a commitment to lend.

² This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.

³ Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.