Mortgage vs SWP
Got a lumpsum? Prepay the home loan, or invest it and withdraw monthly to cover the bigger EMI. Same money out of your pocket either way.
Investing leaves $35.6K extra
Keep the full loan, invest $80,000, and withdraw $694 a month to cover the higher EMI. When the loan ends in 20 years, that much is still invested.
Shown in future amounts. Turn on Today’s money to adjust for 6% inflation.
Investing only wins if you earn more than 8.95% a year after tax.
Prepaying is a guaranteed 8.5% return; investing isn’t guaranteed.
When the loan ends
Prepaying cuts your EMI from $3,471 to $2,777. Investing keeps the $3,471 EMI and covers the $694 difference from the investment.
Investing comes out $35.6K ahead, if returns hold.
The invested lumpsum
The investment shrinks but survives while it pays the EMI difference.
Years from nowShow the numbers as a table
| Year | Invested balance |
|---|---|
| 0 | $80,000 |
| 1 | $79,224 |
| 2 | $78,371 |
| 3 | $77,432 |
| 4 | $76,400 |
| 5 | $75,264 |
| 6 | $74,014 |
| 7 | $72,640 |
| 8 | $71,128 |
| 9 | $69,465 |
| 10 | $67,636 |
| 11 | $65,624 |
| 12 | $63,410 |
| 13 | $60,975 |
| 14 | $58,297 |
| 15 | $55,351 |
| 16 | $52,110 |
| 17 | $48,545 |
| 18 | $44,624 |
| 19 | $40,311 |
| 20 | $35,566 |
Year-by-year table20 years
| Year | Loan if you prepay | Loan if you invest | Invested balance |
|---|---|---|---|
| 1 | $313,631 | $392,039 | $79,224 |
| 2 | $306,700 | $383,374 | $78,371 |
| 3 | $299,155 | $373,944 | $77,432 |
| 4 | $290,944 | $363,680 | $76,400 |
| 5 | $282,007 | $352,509 | $75,264 |
| 6 | $272,280 | $340,350 | $74,014 |
| 7 | $261,693 | $327,117 | $72,640 |
| 8 | $250,171 | $312,713 | $71,128 |
| 9 | $237,630 | $297,037 | $69,465 |
| 10 | $223,980 | $279,975 | $67,636 |
| 11 | $209,124 | $261,405 | $65,624 |
| 12 | $192,955 | $241,194 | $63,410 |
| 13 | $175,357 | $219,196 | $60,975 |
| 14 | $156,203 | $195,254 | $58,297 |
| 15 | $135,356 | $169,195 | $55,351 |
| 16 | $112,666 | $140,833 | $52,110 |
| 17 | $87,971 | $109,964 | $48,545 |
| 18 | $61,093 | $76,367 | $44,624 |
| 19 | $31,840 | $39,799 | $40,311 |
| 20 | $0 | $0 | $35,566 |
How this is calculated
Both paths cost you the same each month: the smaller EMI if you prepay, or the full EMI minus a monthly withdrawal if you invest. So the only difference is what’s left in the investment when the loan ends.
balance = (balance − gap) × (1 + monthly return)
The breakeven return is the rate at which the investment exactly funds every withdrawal. It sits near the loan rate: prepaying earns you the loan rate, risk-free.
Tax isn’t modelled, and it matters here: interest deductions and investment taxes differ by country. Compare against your after-tax return. Prepayment penalties aren’t included.