Analyze the opportunity cost of debt repayment versus wealth building.
Tax Deductible?
Mortgage Interest deduction
Psychologically, being debt-free is great. Mathematically, investing is better if the market return exceeds your effective mortgage rate.
Optimization Result
By $112,452 after 15 years
$378,406
Growth at 9%
$265,954
Savings at 6.5%
Opportunity Cost
The "Spread" Strategy
Risk Profile
Guaranteed vs. Variable
When you have extra cash, you face a common dilemma: reduce your liabilities (mortgage) or increase your assets (stocks/bonds). The right answer depends on the "Spread"—the difference between your mortgage interest rate and your expected investment return.
Paying down a mortgage at 6.5% interest is mathematically equivalent to a **guaranteed 6.5% return** on your money. It's a risk-free investment in your own equity.
The S&P 500 has historically returned ~10% annually. If your investment return is higher than your mortgage rate, you build more wealth over time by investing. However, this return is **not guaranteed**.
The US tax code often favors debt in two ways:
Note: This tool uses simplified logic. Consult a financial advisor for specific tax and investment advice tailored to your 2024 tax bracket.
This calculator is part of our premier suite of Wall Street investment calculators. Explore the fullUS Stock Market Toolkitto optimize your strategy and manage risk like a professional.
Expand your market intelligence and master risk management with our top recommended professional trading literature.
Explore related calculators to sharpen your edge
Calculate net profit for NYSE/NASDAQ trades including SEC, FINRA TAF, and brokerage fees
Identify disallowed tax losses when rebuying stocks within the 30-day window
Estimate federal tax for Short-term vs Long-term capital gains in the USA
Calculate net income for Qualified and Ordinary dividends under US tax brackets