1% Interest Rate Mortgage: Pay Off in Full or Invest in All-Country Stocks via NISA?

Introduction: Is it really more profitable to invest instead of paying off the loan?

“Since mortgage interest rates are low, it’s more profitable to invest than to pay it off.”

“But interest rates are rising, so is it safe to keep borrowing?”

A mortgage with a 1% interest rate. You have the money on hand to pay it off in full.

Should you pay it off? Or should you buy All-Country stocks in a NISA account and invest it?

It is precisely because you have a significant amount of savings that you are hesitant.

If you pay off the mortgage, your cash on hand decreases. If you invest in All-Country stocks via NISA, it might increase. But it might also decrease.

Hello. I am Pirokichi, a financial planner who doesn’t sell insurance, with 24 years of experience in financial institutions, including 12 years in management.

The Bank of Japan raised the policy interest rate to around 1.0% in June 2026 and to around 1.25% in September. I think many of you are concerned about your own mortgages.

However, what I want to consider today is not predicting the next interest rate.

It is whether your household budget can run comfortably even in years when investments do not go well..

First, I will tell you my answer.

If asked which is better, I definitely recommend “paying off in full.”

However, there is a condition.

Please be sure to keep 6 months to 1 year of living expenses, as well as money you will need soon for education, cars, home repairs, etc.

This is for cases where you can pay it off with the remaining money.

In this article, I will talk about the following three points in order.

1. The pitfalls of calculating “investing in All-Country stocks instead of paying off”

2. How to grow the money saved after paying off in full

3. How to think about early repayment, mortgage tax deductions, and group credit life insurance

So—

Chapter 1: What is missing from the calculation of “don’t pay it off, invest in All Country via NISA”?

All Country is a common nickname for an investment trust (a product where professionals manage money collected from many people) that invests in stocks from all over the world at once.

A way of thinking that is often seen is this.

“The mortgage interest rate is 1% per year. All Country grows at 7% per year. In that case, wouldn’t it be more profitable to invest the money instead of paying it off, and pay it off with the gains?”

Of course, there is some truth to this way of thinking.

If it continues to grow steadily at 7% every year, then in terms of calculation, you would have more money left over with All Country.

However—

That calculation of “growing at 7% every year” does not include years of market crashes.

You should be especially careful when you are liquidating investments to cover monthly repayments.

All Country does not go up steadily every year. There are years when it goes up significantly, and years when it goes down significantly.

In other words, the “long-term average” and the “money available for repayment this year” are not the same thing.

Now, let’s look at the numbers.

What happens to repayments in a year when it drops by 30%?

Suppose the remaining mortgage balance is 10 million yen, with 15 years left, and an interest rate of 1% per year.

With “equal principal and interest repayment,” where the monthly repayment amount remains the same, the monthly repayment is 59,849 yen. That is about 720,000 yen per year.

*To make it easier to compare, we assume the interest rate remains unchanged for 15 years and there are no bonus repayments.

Suppose you put the 10 million yen you could use for a lump-sum repayment into All Country, and every year, you sell 7% of the balance at that time to cover the repayments.

Selling off investment trusts you own little by little to turn them into cash in this way is called “liquidation.”

Actually, 7% of the initial 10 million yen is only 700,000 yen. It is already about 20,000 yen short of the annual repayment of about 720,000 yen.

Now, what if a 30% market crash happens then—

Your assets would drop from 10 million yen to 7 million yen.

7% of 7 million yen is 490,000 yen.

That is about 230,000 yen short of the 720,000 yen needed for repayment.

You would have to cover the shortfall from your savings.

There is one more important thing to consider here.

Selling 7% of your balance does not mean you have made a 7% profit.

If you sell 490,000 yen in a year when prices have fallen, the remaining assets themselves decrease. You are not just paying back using the gains.

“In that case, wouldn’t it be better to just sell 720,000 yen worth without using your savings?”

It is true that if you have enough balance to sell, you can make the repayment.

However, selling about 720,000 yen from 7 million yen means letting go of about 10% of your balance at a depreciated price.

Even if the market recovers afterward, the portion you sold cannot participate in that recovery.

In long-term investing, where you grow assets for retirement and the like, the basic rule is to hold on without panicking even when prices drop.

Continuing to sell at the same pace for repayment even during a market crash goes against this basic principle.

Withdrawing funds itself is not bad. The problem is having to keep selling the amount needed for repayment even when the market is performing poorly.

With investments, you can wait for a recovery if prices drop.

However, mortgage repayment dates come around every single month without fail.

Even if a market crash occurs, the repayment will not wait for you.

10 million yen cannot be put into NISA all at once

There is one more thing that is often overlooked.

You can only put a maximum of 3.6 million yen per year into NISA (1.2 million yen for the tsumitate investment quota + 2.4 million yen for the growth investment quota).

In other words, to invest 10 million yen in one person’s NISA, you need at least three years’ worth of annual investment quotas (3.6 million + 3.6 million + 2.8 million).

*This assumes you have sufficient space in your annual investment quota and tax-exempt holding limit, and that you are using both investment quotas.

If you invest the remainder in a regular account, your profits will be taxed at approximately 20%.

The idea of “not paying it off and investing in All Country via NISA” is not as simple as it seems.

The situation is different for those who can pay it off with their salary

Of course, there are people who can comfortably pay it off with their monthly salary and hold onto their investments without selling anything.

In that case, there is no need to sell during a year of market collapse.

What we have looked at here is the weakness of the plan to “liquidate investments to pay off the loan.” This is not to say that everyone who chooses to invest instead of paying it off will fail.

First, please ask yourself this question.

“Even if my investments drop by 30%, will I be able to continue making payments without selling?”

If you feel even a little bit of anxiety about this question, I believe it is better not to decide based solely on the difference in yield.

The honest truth of Chapter 1 is this:

Rather than the 7% average, focus on repayment during a crash year.

But—

Chapter 2: What do you do with the money you save after a lump-sum repayment?

The biggest benefit of a lump-sum repayment is not just the reduction in interest.

It is the fact that your monthly payments will definitely disappear.

In the previous example, the monthly payment of 59,849 yen would be eliminated.

Even if your income doesn’t change, the money that goes out every month will decrease. The burden on your household budget will be significantly lighter, and your peace of mind will increase.

For those approaching retirement or living on a pension, this difference is not insignificant.

However—

It is meaningless if you end up spending the money you saved without realizing it.

Take the money you were using for repayments and put it directly into savings.

Therefore, this is what I would like to recommend.

Take the 59,849 yen you were paying every month and invest it directly into All Country via NISA.

That comes to about 720,000 yen per year. This amount fits well within the NISA “installment investment quota” (1.2 million yen per year).

You don’t have to make a one-time choice between “paying it off or investing.”

Pay it off first. Then, invest monthly.

With this order, even if your investments drop, you won’t need to sell them for your mortgage.

Even if a market crash occurs, you can simply treat it as “expected” and continue your investments calmly.

How much will you have after 15 years of investing?

So, what happens if you invest 59,849 yen every month until the 15-year mark when you were originally scheduled to finish paying off the loan?

First, let’s look at the case where it doesn’t grow at all through investment.

59,849 yen × 12 months × 15 years = 10,772,820 yen. Approximately 10.77 million yen.

This is roughly the same as the 10 million yen paid off in a lump sum plus the approximately 770,000 yen in interest you would have paid.

However, this is not a story about 10 million yen naturally returning to you. It reaches approximately 10.77 million yen precisely because you are reinvesting the amount you were paying into the loan from your monthly income.

Next, as a comparison benchmark, let’s assume it grows at a rate of 7% per year.

After 15 years, it will be approximately 18.97 million yen.

*Calculated based on monthly contributions at the end of each month, using a monthly interest rate of 7% per year divided by 12, with gains reinvested (compound interest).

This is also a calculation that excludes interim market fluctuations. It does not guarantee that a lump-sum repayment will always result in greater assets.

*This calculation does not guarantee future investment results. Investment trusts do not guarantee principal, and the value may fall below the total amount contributed after 15 years.

“I’m scared of 10 million yen disappearing.”

I completely understand that feeling.

After all, it is money you have worked hard to save disappearing from your bank account all at once.

That is precisely why you should first check your bank balance after the repayment.

Even after subtracting six months to a year of living expenses and upcoming costs, will you still be able to live with peace of mind?

Money used for repayment cannot be withdrawn as easily as savings.It is important to ensure you have peace of mind after the repayment before proceeding.

Also, there is no need to put money you will use in a few years into all-country funds. Keep it separate from your savings according to when you plan to use it.

And—

If you no longer have mortgage payments, you can reduce or pause your investments during months when your household budget is tight.

Repayment is a commitment, but investments can be adjusted to fit your household budget.

This freedom is also a major benefit of lump-sum repayment.

This is the honest truth of Chapter 2.

From money that pays off debt to money that grows.

Now—

Chapter 3: How should you think about early repayment, mortgage tax deductions, and group credit life insurance?

Be cautious about partial early repayment

Early repayment means paying off part or all of a loan earlier than scheduled. Here, we will consider “partial early repayment,” where you pay back only a portion.

“I can’t pay it all off, but should I at least pay back 3 million yen?”

The logic is the same as paying it off in full. The remaining balance you owe decreases, and the interest also decreases.

However, caution is required.

With partial early repayment, your monthly payments remain.

If you choose to shorten the repayment period, your monthly payment amount usually does not change. Even if you choose to reduce the monthly payment amount, it will not become zero.

Even though your cash on hand has decreased significantly, your payments from the following month onwards will continue.

If an unexpected expense occurs on top of that, your household finances will suddenly become strained.

That is why I do not recommend reducing your cash by forcing a partial early repayment when you do not have enough leeway to pay it off in full.

There is no need to be impatient about not being able to pay it off. Having cash on hand also plays an important role in protecting your livelihood.

You can wait until you have fully utilized the mortgage tax deduction

Mortgage tax deduction is a system where your income tax and residence tax are reduced based on your year-end loan balance. For those who moved in from 2022 onwards, in principle, 0.7% of the year-end balance is the basis for the calculation.

For those who still have deductions remaining, you can choose to continue repayments until you have fully utilized the deduction. It is fine to consider paying it off in full after the deduction period ends.

However, waiting for the deduction is not necessarily always more profitable. Even in this example of a 1% interest rate, be sure to compare the actual tax savings with the interest you will continue to pay.

※ If, due to partial early repayment, the period from the first repayment to the shortened final repayment becomes less than 10 years, you will not be able to receive the mortgage tax deduction from that year onwards. This does not mean “the remaining period from now is less than 10 years.”

The remaining number of years for the deduction varies depending on the year you moved in and the property. Please check your own documents to see how many years are remaining.

Is it true that “you shouldn’t pay it off because you have group credit life insurance”?

Group credit life insurance (Danshin) is a life insurance policy that pays off the remainder of the loan on your behalf in the event that the person who took out the loan passes away.

With standard group credit life insurance, there are many products where the financial institution covers the insurance premiums, and the borrower does not pay separate premiums. However, conditions vary by product, such as interest rates being added if you enhance the coverage.

“Because there is group credit life insurance, it’s better not to pay it off even if you have the money.”

Just having group credit life insurance is not a reason to decide against paying it off.

However, that does not mean group credit life insurance has no value. If you keep your savings and the loan is paid off by the insurance in the event of an emergency, those savings can be left to your family. This is different from the case where you pay it off with your own money.

Even considering that difference, what I want to prioritize is keeping the money necessary for daily life and ensuring that monthly repayments are eliminated.

For those who need to protect their family’s living expenses, there is a way to prepare only for what is necessary using term life insurance instead of using savings for that purpose.

However, depending on your age and health condition, you may not be able to enroll in new insurance. Before paying off the loan, check whether you can enroll and what the premiums would be.

“It’s a waste to lose the cancer group credit life insurance.”

Group credit life insurance with illness coverage, such as cancer insurance, also ends when the loan is paid off.

But, the logical way to prepare for illness is to first prepare with savings. This is because it can be used not only for medical expenses but also for living expenses while you are unable to work.

I wrote about this way of thinking in detail in a previous article.

▶ Is cancer insurance really necessary?

Also check the costs involved in a lump-sum repayment.

Lump-sum repayment may incur fees. Some places are free if done online, while others may charge tens of thousands of yen at the counter.

After paying off the loan, you also need to go through the procedure of “mortgage cancellation” to remove the collateral attached to the house and land. The tax (registration and license tax) is 1,000 yen for each piece of land and building. If you ask a judicial scrivener, there will be additional costs.

The real intention of Chapter 3 is this.

Before repayment, prepare for life.

Conclusion — Where the 3 real intentions point

Let’s look back at today’s discussion in three phrases.

Rather than the 7% average, repayment in a year of market crash.

From money for repayment to money for growth.

Before repayment, prepare for life’s needs.

They may look different, but they point to the same goal.

Separate repayment from investment to build a household budget that won’t panic if a market crash occurs.

You might end up with more assets if you invest the money instead of paying off the loan.

Even so, I recommend a lump-sum repayment because it allows you to eliminate your monthly payments for certain, without waiting for investment results.

Set aside the money needed for living expenses, then pay off the loan first. After that, use the money you were paying toward the loan to invest in NISA.

Secure your household’s peace of mind first, then continue building your assets steadily.

This is the order I recommend.

So, what should you do?

1. Check your repayment schedule for the balance, interest rate, remaining years, and monthly payment amount.

2. Check the remaining years of your mortgage tax deduction.

3. Set aside 6 months to 1 year of living expenses plus money you will need in the near future.

4. Check if you can pay off the loan with the remaining money, including fees and family insurance coverage.

5. If the conditions are met, pay off the loan in a lump sum and switch the freed-up monthly amount to NISA contributions.

You don’t have to decide right away.

Start by opening your repayment schedule tonight and checking the numbers with your family.

This article provides general information based on personal views and is not investment advice for individual households. The content is current as of October 2026. Calculations are based on assumptions and do not guarantee future investment performance. Investment trusts do not guarantee principal. Please check your contract details, fees, and group credit life insurance coverage with your lending financial institution, and confirm tax conditions with the tax office, etc., before making your own decisions.

Thank you for reading until the end.🙏

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To those who have read this far: Are you in the “pay it off” camp? Or the “invest it” camp? If you are feeling conflicted, please feel free to let me know in the comments.