Ballast
Ballast/Property desk/No. 09

Compare · Property desk · 2 minutes

Cash or Mortgage at Your Bracket

You have the price of the house. The question is whether the bank's money is cheaper than yours. This instrument runs both paths month by month — the mortgage's coupon, the invested lump, the tax shield if your jurisdiction grants one — and prints the wealth each leaves at the end of the term, plus the exact return where they cross.

Currency-agnostic · symbol only Rules version 1.0 Reviewed July 2026

Arithmetic under your assumptions — not advice. A mortgage is leverage; the simulation shows expected paths, not bad sequences.

The manifest — your numbers

Σ

You have this in cash — that's the premise.

Σ

Sets the payment-load gauge.

% / yr
years

The comparison horizon — both paths are read at this date.

% of price
% / yr

What the un-spent lump earns. The whole decision is this against the rate.

Varies by jurisdiction and use. If yes, the shield is invested as it arrives.

%

Only used if interest is deductible.

Nothing you type leaves this page. The instrument runs entirely in your browser; there is no account and no record.

The reading

Mortgage, and invest the rest.

+$157,035

end-of-term wealth, mortgage path against cash path

Two paths, month by month

Monthly payment
Total interest paid over the term
End wealth — cash path
End wealth — mortgage path
Break-even return
The difference

Three markets, same house

If invested money returnsBetter pathBy

What moves this result

What would sink this reading

Sequence risk is invisible to an average return. If the invested lump halves in year two, the mortgage path feels very different from the smooth line simulated here.

A paid-off house is a position too — a bond paying the mortgage rate, tax-free, uncallable. Some people are paid in basis points; others are paid in sleep.

Rates move. A mortgage can usually be refinanced when they fall; the cash decision cannot be unmade nearly as cheaply.

Questions people bring to this desk

Is it better to pay cash for a house or take a mortgage and invest?
In expectation, the mortgage path wins when your after-tax investment return exceeds the mortgage's effective rate, and loses when it doesn't. This instrument simulates both month by month at your numbers and prints the end-of-term wealth of each, plus the exact break-even return.
What is the break-even return between cash and a mortgage?
Roughly the mortgage rate, adjusted down by any tax deductibility of interest — a 5.5% rate at a 35% bracket with full deductibility behaves like about 3.6%. The instrument computes your precise figure by bisection rather than relying on the approximation.
How much mortgage payment is safe relative to income?
The classic front-end convention is 28% of income on housing payments; the gauge on this page draws its line there against your net income. It's a convention about comfort, not a law — but past it, the payment starts steering the rest of your balance sheet.
Methodology — the formula, printed

Both paths buy the same house on day one and enjoy the same income thereafter, so the house itself cancels out and only the money paths differ. The simulation runs month by month — no closed-form shortcuts.

Cash path: pay P. Invest the mortgage-sized payment each month at i = r/12. Mortgage path: pay down·P. Invest (P − down·P) at i. Pay pmt from income (symmetric with the cash buyer's investing). If deductible, invest interest_t × bracket monthly. pmt = L·j / (1 − (1+j)^−m), j = rate/12, m = months

End wealth is compared at the final month; the break-even return is found by bisection — the r at which the two paths tie. The gauge reads annual payments against net income with the line at the classic 28% housing convention.

Limitations. Constant rates and returns; no refinancing, prepayment, or investment taxes; the tax shield uses your flat marginal bracket. Sequence-of-returns risk — the real argument for caution with leverage — cannot appear in an expected-value table.