INVESTMENT
Equity Invested vs. Mortgage Cost
See if investing your released equity beats the extra mortgage cost — and when it becomes self-financing.
Released Equity
Net capital available after refinancing costs
Extra Mortgage Cost
Increase in monthly mortgage payment after refinancing
Investment Parameters
S&P 500 historical average ~7–10% real
Investing the equity is worth it
Net Gain (Portfolio − Mortgage Cost): +€95,484
Portfolio Value
€193,484
20 years
Total Extra Mortgage Cost
€48,000
€200/mo × 20y
Self-Financing Year
1 year
Year when annual investment return ≥ annual extra mortgage cost
Break-even Year
1 year
Year when net gain turns positive
Portfolio Growth vs. Mortgage Cost
For educational purposes only. Past returns do not guarantee future performance. Consult a financial advisor.
About This Calculator
When you refinance your mortgage to release equity, you face a critical decision: does the extra capital you extract justify the higher monthly payment? This calculator answers that question with mathematical precision, simulating year-by-year how your investment portfolio grows versus the cumulative cost of the loan.
The strategy is straightforward: you extract equity from your property (which would otherwise be 'locked' in the asset) and invest it in a return-generating instrument — typically a global index ETF like the S&P 500. The cost of this operation is the higher monthly payment from the larger loan. The question is: does the investment return beat that cost? And when?
Worked Example
In the PT market, imagine refinancing your mortgage and releasing €50,000 in equity. The monthly payment rises by €200 (€2,400/year). You invest that amount in an ETF with an assumed annual return of 7%.
| Year | Portfolio | Cumul. Mortgage Cost | Net Gain |
|---|---|---|---|
| 1 | €53,500 | €2,400 | +€1,100 |
| 3 | €61,252 | €7,200 | +€4,052 |
| 5 | €70,128 | €12,000 | +€8,128 |
| 10 | €98,358 | €24,000 | +€24,358 |
| 15 | €137,952 | €36,000 | +€51,952 |
| 20 | €193,484 | €48,000 | +€95,484 |
In this PT scenario, break-even is the first year in which net gain becomes positive. Annual coverage begins when 7% × portfolio value is at least €2,400/year. Compare these thresholds with lending and return assumptions appropriate to the selected market.
How It Works
Enter the equity you released via refinancing, the extra monthly mortgage payment it caused, and the expected investment return. The calculator shows year-by-year how your portfolio grows, how much the extra mortgage costs, and when the investment becomes self-financing — meaning the annual return covers the annual mortgage cost without touching the principal.
Frequently Asked Questions
What does 'self-financing' mean?
Self-financing means the annual investment return (e.g. 7% × portfolio) is large enough to cover the annual extra mortgage payment. At that point, the investment effectively pays for itself without reducing the principal.
Should I use returns to cover the mortgage cost?
If you toggle 'Use returns to cover extra payment', the calculator simulates withdrawing from the portfolio each year to pay the extra mortgage. This reduces compounding but improves cash flow. The alternative is to pay the extra mortgage from salary and let the portfolio compound fully.
What return rate should I use?
The S&P 500 has historically returned ~10% nominal (~7% real after inflation). For a conservative estimate, use 6–7%. For a world ETF, 6–8% is reasonable.
Is this the same as the Refinancing calculator?
No. The Refinancing calculator shows whether refinancing is worth it overall. This calculator focuses specifically on the investment mechanics: given that you have the equity, does investing it beat the borrowing cost, and when does it become self-financing?