Run a quick comparison before paying off your mortgage — don’t rely on gut feeling

Paying off your mortgage is essentially the same as earning a guaranteed return equal to your mortgage rate. So the only question you need to ask is: can you reliably earn a higher after‑tax return than that rate? If the answer is yes, it makes sense to keep the money invested. If not, or if you’re unsure, paying off the loan is the better choice. With an equal principal‑and‑interest repayment plan, most of the early payments go toward interest; the earlier you pay, the more you save. Most bank apps have a “pre‑payment calculator” that gives you the exact numbers.

No cost at all. It only takes about half an hour to do the math. You’ll need to honestly estimate the steady after‑tax return you can expect over the long run.

The calculation works like this: let r be the annual mortgage rate as stated in your contract. As of 20 August 2026, the 5‑year LPR in China is 3.5%; the actual rate you pay is either higher or lower than this figure. Next, let g represent the after‑tax annual return you can expect from an alternative investment — the average percentage gain you’d earn each year by putting that money elsewhere. Paying off the mortgage guarantees you a return of exactly r; each dollar you apply to the loan earns you that rate for sure. If g consistently exceeds r, it’s better to keep the money invested. If g is lower than r, or if you can’t reliably predict it, paying off the loan locks in a risk‑free return equal to r. Again, because most of the early payments under an equal principal‑and‑interest plan cover interest, the earlier you pay, the more you save. This effect is clearly shown by the numbers produced by your bank’s pre‑payment calculator (Chinese rates as of 2026).

This section provides only the calculation method, not a definitive recommendation. It’s relatively rare for investment returns to reliably surpass mortgage rates. Regardless of which option you choose, be sure to keep enough cash on hand for emergencies. Also, check your contract for any prepayment penalties. This information is not intended as financial advice.

全国银行间同业拆借中心受中国人民银行授权 (2026). 2026 年 8 月 20 日贷款市场报价利率（LPR）公告. https://www.chinamoney.com.cn/chinese/rdgz/20260820/3399885.html