Pay down the mortgage or invest?
Paying extra on a mortgage earns a guaranteed return equal to its interest rate. Investing the same money could earn more or less. The fair comparison is mortgage rate versus after-tax yield at similar risk.
How to compare
- Find your mortgage rate (CFPB explains how rates are set).
- If you itemize, mortgage interest may be deductible, lowering its real cost; most people take the standard deduction.
- Compare with what low-risk investments pay after federal, state and investment-type tax.
Other things that matter
Prepaying ties money up in the house; an emergency fund should come first. Investments can be sold, but higher yields carry more risk.
Check today's yields
IncomeGrid has 40,000+ investment options screened, with risk levels 1–5. IncomeGrid ranks every item by yield after tax for where you live: federal, state and each investment type (Treasuries, municipal bonds, corporate bonds, funds, REITs and filed offerings are each taxed differently).
Compare with your mortgage rate →
Sources
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