So if I'm understanding this correctly. Pay the minimum - Worse case I'll come ahead 0.3% and best case 5.6%. Is this my overall scenario or just during the PMI period?

No, that's not what I meant. 0.3% to 5.6% is the return expected by paying $500/month extra on your mortgage until PMI is gone. But looking at my math again I'm not sure that's the right way to think about it.

A good way to test if numbers make sense is to try the calculation another way. So let's try this instead:

94 minimum payments...

Payment + PMI sum: $68.3k

Loan principal reduction: $17.6k

Investment balance: $39.0k, $51.7k, $66.5k, $98.4k, $162.2k (min, bottom 10 percentile, median, top 10 percentile, max) [

7 years, 10 months]

26 extra payments + 68 minimum payments...

Payment + PMI sum: $76.2k

Loan principal reduction: $35.4k

Investment balance: $34.2k, $41.9k, $50.0k, $65.7k, $92.2k

~~Worst case scenario (-4.953% returns): Paying $500/month extra is better by $5.1k~~

Really bad returns (2.442% returns): Break even ($100 difference)

Median stock market (8.513% returns): Minimum payments is $6.6k better

Really good returns (17.288% returns): Minimum payments is $22.8k better

Best 94 months ever (27.556% returns): Minimum payments is $60.1k betterHmm, is it really better to invest in the stock market at ~2.5% than pay down a mortgage at 4.75% + PMI? I must be doing something wrong here... I don't see any obvious errors though and I have to go to bed now. Maybe someone else can point out any flaws in this math.

Edit: My math was wrong. See

update below.