When it comes to your mortgage, there’s a question almost every homeowner wrestles with at some point:
Should I pay off my mortgage early… or let it ride and invest the difference?
At first glance, the answer might seem obvious—especially when you look at how much you end up paying over 30 years. But the reality isn’t so simple. In fact, a deeper look at inflation, investment returns, and financial priorities might flip your thinking completely.
Let’s walk through the numbers, the trade-offs, and why this decision is about more than just math.
The numbers are shocking… at first
Imagine you bought a $425,000 home with a 20% down payment and a 30-year mortgage. Depending on several factors (like property tax, home insurance, etc.), the numbers may vary. But painting with a broad brush, here are a couple of examples of how much you’d end up paying:
- At a 3.5% interest rate, your monthly payment is around $1,873, totaling about $674,000 over 30 years.
- At a 7% rate, your payment jumps to $2,608—or about $938,000 over the life of the loan.
In both cases, you’re paying far more than the original home price—150% to 220% more. That sounds like a rip-off, right?
At this point, many people stop the conversation and commit to paying it off early. But hold on…
How inflation changes the story
Yes, you’re paying more in nominal dollars—but those dollars are worth less over time thanks to inflation.
Over the past 30 years, inflation has cut the purchasing power of the dollar by around 50%. That means the money you use to pay your mortgage in year 25 buys a lot less than it does today.
So while you’re writing bigger checks over time, the real value of those payments is actually shrinking. In a sense, you’re paying off your house with “cheaper” dollars as time goes on.
What else could you do with the money?
There’s also the opportunity cost of paying off your mortgage early when you could be using that money elsewhere. For instance, if you invested that extra money in the stock market rather than giving it to the bank each month, you could potentially earn much more than you would save in interest.
Look at the S&P 500. From 1995 to 2025, it returned about 10.5% per year (with dividends reinvested). That means $100 invested in 1995 became nearly $2,000 by 2025.
Now think about this: If you redirected just $200 per month into the market instead of putting it toward your mortgage, over 30 years, that could grow to over $450,000—assuming historical average returns.
This doesn’t mean you should ignore your mortgage… but it shows the power of putting your money to work elsewhere.
And it doesn’t have to be in the market. You could:
- Build an emergency fund
- Invest in markets or real estate
- Start a business
- Save for your kids’ education
- Simply stay liquid and flexible
Paying off your mortgage early locks that money up in your house.
Keeping the loan (especially at a low rate) means you have options. And optionality = freedom.
But what about peace of mind?
Of course, money isn’t just numbers on a spreadsheet—it’s emotional. For some people, debt causes stress, anxiety, and even health issues.
If being in debt eats away at you—if it keeps you up at night—then the financial trade-off doesn’t matter. Pay it off. That peace of mind is priceless.
There’s nothing wrong with choosing what feels right for you, regardless of the math.
The bottom line
There’s no one-size-fits-all answer to whether you should pay off your mortgage early. But as you decide if it’s the right choice for you, here’s what you should do:
- Understand your mortgage terms
- Know how inflation affects long-term payments
- Think critically about your financial priorities
- Evaluate your alternatives—can your money work harder elsewhere?
- Consider your emotional relationship with debt
And above all, put yourself near the top of your financial totem pole. Because the better you manage your money, the more choices and freedom you create for yourself and your family.
P.S. Be sure to check out our recent YouTube video, where Daniel breaks down this question in even greater depth.
