This New Zealand calculator compares buying a home with cash against keeping a mortgage and investing the difference. Paying cash saves the mortgage interest for certain, while investing the cash could earn more if returns beat the mortgage rate, though that is not guaranteed. You enter the amount, the mortgage rate, an expected investment return and a period, and the tool shows which path comes out ahead on the numbers.
A simplified comparison: interest saved on the balance versus growth on the invested amount. The mortgage saving is certain; the investment return is not. Being mortgage free has value beyond the numbers. Estimate only, not financial advice.
If you pay cash, you save the mortgage interest on that amount over the period, which the calculator works out at the mortgage rate. If you keep the mortgage and invest the cash instead, your money grows at the after-tax investment return over the same period. Comparing the interest saved with the investment growth shows which option leaves you ahead, holding everything else equal.
On $400,000 over 10 years, a 6.5% mortgage rate saves a large amount of interest by paying cash, while a 5% after-tax return on the invested amount grows it by less, so paying cash wins here. If the investment return were well above the mortgage rate, investing would win, but with more risk.
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