Prepay vs. Invest

Change these fields as desired:
Prepay vs. Invest
This form allows you to compare what would happen if you took one of two choices with some extra cash you have -- prepaying your mortgage each month, or investing it instead. This tries to take into account your tax situation and assumes you always itemize (even late into your mortgage when the interest portion of your monthly payment is less -- I am assuming you give to charities, and pay state and local taxes too!!)

How much more you have to spend each month?
Current monthly payment (principal & interest only)
Current Annual Loan Interest Rate
Current Loan Balance
Loan Interest Deductibility
Expected Long Term Investment Return (%)
Expected Long Term Tax Rate (%) (Federal+State)
Investment Type

Loan Balance
Current Payment
Additional Payment
Loan Interest Rate
Loan Interest Deductibilty
Investment Return Rate
Tax Bracket
Investment Type	After-Tax

Month	Loan Bal (P)	Int Paid (P)	Tax Ded (P)	Loan Bal (I)	Int Paid (I)	Tax Ded (I)	Inv Bal (I)
PREPAYING				INVESTING

	Prepay	Invest
Total Interest ( yrs)
Loan Payback Time (Years)

Loan Balance - Investment :

In your case it is wiser to prepay than to invest

Investment - Loan Balance :

In your case it is wiser to invest than to prepay

Assumptions:
This estimation assumes you will pay a fixed amount every month to either your loan prepayment or to some type of after-tax or tax deferred investment. If it is after-tax it will be more available to you, but every 12 months you will be forced to pay tax on your annual yield. This also assumes that you take the extra tax savings by NOT prepaying (prepaying lowers your deductible interest payments) and you put the tax savings into the investment as well. This also assumes that the top income tax rate will stay the same for a long time. This tax rate should also include your state income tax too if applicable.

Information and interactive calculators are made available to you, a financial advisor, as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to client’s individual circumstances. All examples are hypothetical and are for illustrative purposes. Related to tax implications, property purchase and sale prices, and loan terms clients need to seek personalized advice from qualified real estate and tax professionals.