How quickly should you pay off your home?

What would happen if you had an extra $500 every month burning a hole in your pocket - would you:

1) use the money to help pay down your mortgage every month

or

2) invest the money in a 401k every month

Meet Ben and Jerry.  They live in the same neighborhood, have identical mortgages and identical mortgage rates. 

Ben wants to pay down his mortgage and puts the extra $500 bucks onto his mortgage every month on top of his normal payment.  Ben actually pays off his house in 18 years, 12 years sooner than Jerry. 

Now that his house is paid off, Ben now decides to invest the money he sunk into his mortgage every month and also the extra $500 bucks - which gives him $2,496 to invest into a 401k every month for the next 12 years.

Jerry doesn't make any extra mortgage payments with his extra cash.  But in 18 years, his extra $500 bucks in investments every month has turned into $270,817 (assuming he makes 9% interest on his investments).

..so who actually comes out ahead?

At the end of the 30 years, both guys own their own homes but Jerry comes out ahead financially almost $300,000 above Ben.  But in fact, Jerry is way ahead of Ben because this scenario doesn't even include the tax deduction on mortgage interest!

Comments

[Funny about Money]

But even though Jerry has a nice chunk of money in his savings account, he's also spent at least that much (probably more) in interest on the loan. Shouldn't the amount of the mortgage interest paid over 12 years be subtracted from his $270,817 to show what it's costing him to put that $500/month into savings?