Before prepaying your mortgage, work through one comparison; don't go by feel
- Top value
- Evidence C
- Saves money
- Free
- Takes minutes
- No willpower
In plain words
Prepaying a mortgage is the same as earning your mortgage rate with certainty. So ask only one thing: is the after-tax return you can get steadily over the long run higher than your mortgage rate? If it is, don't rush to prepay; if it isn't, or you can't tell, prepay. With equal-installment loans, interest makes up more of the payment in the first few years, so the earlier you prepay the more you save. The "prepayment estimate" in your bank's app gives you the number directly.
- Cost
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Free. Spend half an hour on the arithmetic. You have to be honest about the steady after-tax return you can actually get.
- What you get
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Here is the calculation. First let r be the annual mortgage rate, per your contract. The LPR for terms over 5 years on August 20, 2026 is 3.5%, and the rate actually applied is the LPR plus or minus some points. Then let g be the after-tax annualized return on the other investment you could choose: the share you would earn on average each year by putting the money elsewhere. The certain return from prepaying is r, so each amount you pay off is like earning r with certainty. If g is steadily greater than r, keeping the money invested is the better deal. If g is less than r, or g is simply uncertain, then prepaying locks in a risk-free r. With equal-installment loans, in the first few years more of what you pay goes to interest, so the earlier you prepay the more interest you save. For this, use the "prepayment estimate" in your bank's app to see the numbers directly (China, 2026 rates)
- Notes
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Only the method is given here, not a conclusion. Cases where investment returns steadily beat the mortgage rate are a minority. But whichever side you choose, first keep enough emergency cash. Also check whether the contract has a prepayment penalty clause. Before prepaying, you can first ask the bank to lower your rate; see §15.15 (negotiating a lower rate). This is not investment advice.
- Evidence grade
- C : The author's experience or common practice, without direct literature.
- Sources
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- 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
Mentioned in
Translated from the Chinese original. Original book, section 5, tip 28. This section is about money and spending. It is general information, not financial or investment advice. Content may be out of date and rules differ by place. When you actually deal with an agency, a doctor or a court, follow what local officials, doctors and lawyers tell you. Disclaimer