BiggerPockets Money Podcast

Episode: Should You Pay Off Your Mortgage or Invest? (Best Choice for FIRE)

Date: November 14, 2025
Hosts: Mindy Jensen & Scott Trench

Episode Overview

This episode tackles one of the longest-running personal finance debates—should you pay off your mortgage early, or invest your extra money for potentially greater returns? Mindy Jensen and Scott Trench break down the math, the taxes, and the emotional/psychological side of the decision, introducing a new mortgage payoff vs. invest calculator available at BiggerPocketsMoney.com. Using real-world examples and “what if” scenarios, they provide listeners from the FIRE (Financial Independence, Retire Early) movement with a clearer path to the right answer for their unique situations.

Key Discussion Points & Insights

1. The Mortgage vs. Investing Dilemma (00:00–04:10)

• Main Question: With mortgage rates averaging 6% or less for most homeowners, should you pay off your mortgage or invest extra cash?
• Scott’s Research & Calculator: Scott found most online calculators lacking, leading him to build a more comprehensive one that factors in long-term horizons, changing assumptions, and especially taxes.
  • Quote [01:55]:
    “There’s no good way to make this analysis. And so today I’m excited to talk about … what is going to matter in the context of the decision … [and] a wonderful, I think the best ever, maybe new calculator to analyze this decision that I built and embedded on biggerpocketsmoney.com.” —Scott

2. The Numbers: Returns, Risks, and Tax Impacts (04:10–08:48)

• Historic Perspective: A Journal of Financial Planning study (1963–2019) shows investing generally yielded 50% more wealth than paying off a 6% mortgage, excluding taxes and emotional considerations.
• Market Timing: While historic averages favor investing (around 10%/year), recent high valuations raise the risk that returns may be lower in the next decade.
• Tax Angle: Mortgage interest and investment gains have nuanced tax consequences that shift the calculus depending on your income, filing status, and mortgage size.
  • Quote [02:51]:
    “There’s also tax considerations … that can hide behind the [surface] analysis … I tried to capture all that in this calculator here.” —Scott

3. How the Calculator Works & Sample Scenarios (08:48–19:24)

• Customizable Inputs: You can toggle mortgage amount, interest rate, loan terms, tax filing status, assumed investment returns (including short/long-term market variations), and tax rates.
• Example Case 1:
  • $750,000 mortgage, 6.25% rate, $2,500/month extra payment.
  • If stock returns are low for the next decade (e.g. 3%), paying off the mortgage may win (12:02).
  • If optimistic about markets (7–8%), investing wins (13:12).
• Example Case 2:
  • Same mortgage but higher tax bracket (24–32%) and state taxes—even then, investing generally wins due to favorable spread between investment returns and mortgage rates (13:50).
• Example Case 3:
  • Lower balance ($350,000), still at 6.25%—payoff now wins, as tax advantages are reduced and emotional safety takes precedence for some (14:52).
• Quote [12:03]:
  “Yeah, that's because we're assuming low returns in stocks... If we put like a 7 or 8% return … then we're going to have a higher net worth if we invest instead of paying off the mortgage.” —Scott

4. Nuances and Real-Life Contexts (19:24–24:36)

• Scott’s Own Decision: Scott decided not to take a mortgage in April 2024, and the calculator retroactively validated that he’s likely better off as a result.
  • Quote [19:24]:
    “Look at that. Because I’m a little bit more conservative in how I feel about the future state for the stock market... it says that paying off the mortgage wins.” —Scott
• Age and Investment Horizon: Calculator adapts to age, allowing for lower future investment returns once you’re in retirement mode and switching to a more conservative stock/bond mix.
  • Lower rates or nearing retirement often favor paying off mortgage.
  • Young, aggressive investors with time on their side are tipped toward investing.
• Multiple Scenarios: Mindy and Scott test everything—new loans, old loans, high/low balances, pre-FIRE and post-FIRE, optimistic and pessimistic investment assumptions—with the calculator adjusting outcomes accordingly.
  • Quote [21:32]:
    “So you're asking, Mindy, does age play into this? Right? And I think absolutely age plays into this.” —Scott

5. Psychological & Emotional Factors (25:36–28:13)

• Numbers vs. Feelings: The calculator is purely analytical; it cannot factor in your peace of mind.
  • Some people simply “hate debt” and would rather pay off their mortgage regardless of maximum returns.
  • Others get comfort from liquidity and the growth potential of investments.
• The 4% Rule: Having a paid-off mortgage lowers your living expenses, making the path to FIRE easier and retirement portfolio withdrawals less risky.
  • Quote [26:32]:
    “For some people, any debt is bad debt... if your goal is to pay off your mortgage, then pay off your mortgage. It doesn’t make you a bad person … it ultimately comes down to can you sleep at night?” —Mindy
  • Quote [26:32]:
    “Having a paid off mortgage is a really wonderful psychological benefit … You can live that on a much lower income base... if you don’t have a paid off mortgage because you’re only paying taxes, insurance, maintenance…” —Scott

6. Life Stage Matters (28:13–31:38)

• Young Investors (“Set for Life” era): Scott recommends investing when you’re young, have time, and can stomach volatility and risk.
• Older/Close to FIRE: If close to retirement, with a low-rate mortgage, investing the spread generally wins. If you’ve refinanced to a much higher rate or become more risk-averse, paying off the house can start to make sense.

7. Final Takeaways & Calculator Availability (31:38–32:36)

• Flexibility & Free Access: The calculator isn’t just for geeks—the entire FIRE community can use it for free (no email required).
  • Quote [32:02]:
    “I could not find a calculator that took in all of these things into consideration. … By the way, this thing is free. This is on our site. There's no ads on this particular page, and there's no email capture or whatever...” —Scott

Notable Quotes

| Timestamp | Quote | Speaker | |-----------|-------|---------| | 01:55 | “There’s no good way to make this analysis… a wonderful, I think the best ever, maybe new calculator to analyze this decision that I built and embedded on biggerpocketsmoney.com.” | Scott | | 04:10 | “It’s real easy to say, ‘Oh, 3% mortgage vs. 10% returns, of course you invest,’ but those returns are taxed, like you said.” | Mindy | | 12:03 | “Yeah, that's because we're assuming low returns in stocks… then we're going to have a higher net worth if we invest instead of paying off the mortgage.” | Scott | | 19:24 | “Because I'm a little bit more conservative in how I feel about the future state for the stock market… my approach, I actually hadn't run that through this calculator prior… but yeah, it says that paying off the mortgage wins.” | Scott | | 26:32 | “For some people, any debt is bad debt… if your goal is to pay off your mortgage, then pay off your mortgage. It doesn’t make you a bad person… can you sleep at night with this mortgage and if you can't, then pay it off.” | Mindy | | 26:32 | “Having a paid off mortgage is a really wonderful psychological benefit… You can live… on a much lower income base, relatively speaking, if you don’t have a paid off mortgage…” | Scott | | 32:02 | “I could not find a calculator that took in all of these things into consideration… this thing is free… an invitation for feedback.” | Scott |

Key Timestamps for Reference

• 00:00–04:10: Framing the dilemma, why most calculators currently stink
• 04:10–08:48: Math, taxes, stock market averages, risk, and recent history
• 08:48–19:24: Deep dive into calculator scenarios
• 19:24–24:36: Real-life decisions, age impact, and nesting your calculations
• 25:36–28:13: Emotional/psychological reasons to pay it off or keep investing
• 28:13–31:38: Young vs. older investor scenarios, effect of loan rates, and retirement
• 31:38–32:36: Free calculator, invitation for feedback, episode wrap-up

Conclusion: What’s the Best Choice?

There is no universal answer—your optimal path depends on your market outlook, loan balance and rate, tax situation, age, risk tolerance, and, crucially, your peace of mind.
Use the BiggerPockets mortgage payoff vs. invest calculator to play out your scenarios—and remember: The “right” decision is the one that lets you sleep at night!