Should You Save, Invest or Pay Off Your Mortgage?

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This video looks at the topic of whether you should save, invest or pay off your mortgage right now? With the recent rise in interest rates and the upcoming mortgage crises, does this change the way we should be using our extra money? Or is that the wrong way of even looking at this problem.

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[NS-ptrr]

Absolutely Right. My fixed rate expired in May 23, went up & the best fix i could get was 4.6% up from 1.94. The instalments went up by about £150pm, but looking into it a bit deeper i noticed that the interest charged was £940, up from £380 !! I have decided to overpay by 800pm and the best thing is, my mortgage will be cleared 7 years earlier, so 4 years and im done !! Imo its a no brainer.. forget the new cars etc & concentrate on clearing the mortgage, after its clear its holidays, cars or whatever you want. Sadly the west is brainwashed into thinking keeping up with jones', living a false highlife with sleepless, depression is a must, debt fuelled life is wrong, mindset has to change !!

[barbarar]

We dont have ISAs over in Ireland, so we dont have the same tax breaks you guys have over in the UK. I think its important to diversify. If had extra cash, I would split it between my pension, mortgage and investment account. Extra in pension for tax breaks, extra in the mortgage for peace of mind and extra in regular investments because they can easily be liquidated.

[JustMeTalking]

We paid off our Mortgage and upgraded our homes Energy Performance to A+ (EPC 107 Score).

Bought two electric cars for cash, now we visit family & friends all the time really cheaply, supporting them through this Cost of Living problem.

[geolykos]

Just locked a rate for January at 5.5%. That's up from 2.2%. What Im gonna be doing is paying my mortgage payments. If I have spare money I'll invest in stocks/ETFs

[shaun]

One thing that rarely gets mentioned is that if you are mortgage free, you are less likely to need to get finance for unforseen expenses such as dental, cars, new appliances etc. These loans are often at a very high rate.

[AshJun]

I'm paying off my mortgage due to interest rate hikes. I'm too risk averse to put a large lump sum into investments in one go and get more out of knowing I've guaranteed my myself a 6% saving on a large balance. Great vid as always!

[nicobass]

Like it and thank you for the update - paid off my morgage 3 years ago and ploughing a lot into my pension, although returns are not great - hoping that might change in the next 3/4 years . Other cash is in allowance ISA with fixed for two years but will look at swapping between cash and stocks ISA as they go - Bonds come out in Jan ( 4%) and will see what is on offer then - yes I'm going to have to pay tax on it. I think people who are reaching near retirement need to think acctually how much do we need to live on based on current life style, again thank you for the update as people need this simple money talk

[abdulrahman]

Great video yet again.
Mortgages come with so many emotional attachments. My house is somewhere i live but its also an investment. Its bricke and mortars. And i have no personal attachment to it. My parents and other family on the other hand saw their house as a home.

[freedomring]

personally I say pay your mortgage off... there is nothing quite like having peace of mind. Knowing you don't have that monthly payment anymore is exhilarating

[lucid]

I do all 3…. $250 a week towards mortgage principle, $100 week into investments and about $100 week into our emergency fund (which is already over 6 months of expenses, but has a 4.75% rate). None of this includes the weekly 401k/HSA and employer matches my wife and I do. As of right now our Mortgage will be paid off in 6 years with a 11 year total payoff. And we should have good returns on the investments. All this when my wife and I make just the average salaries for our state, but we also have zero debt because we only buy used cars with cash and are smart with our money…

[elrevesyelderecho]

5:38 but you need to consider the amount of money that has been printed. As you said before, in the same period of time interest rates were almost 0%. So, free money and printed all assets went out of the roof. There is no warranty that the next 20/30 will be the same.

[liam]

9.55 - although, dont forget, as an investment property (for property investors), the figure for return is higher than 2.4% (at least double in most cases), as your taking rent as well as seeing the capital appreciation

[Azel]

Thanks for the vid! I've been struggling with this for the past 2 years now. My mortgage is 700k and the interest has gone so much that my monthly payment is $2K more than before. Thankfully I have the cash to pay it off so I'm not in a tight spot. Here's are my pros and cons for paying off vs investing:

Pros:
1. Guaranteed return/saving on interest
2. Psychological freedom
3. Extra cash to use

Cons:
1. Investing typically generates higher returns
2. The interest on mortgage is simple interest
3. Inflation and wage growth will lessen the impact of the mortgage in a few years
4. May be able to refinance into a lower rate later
5. The extra money I get each month after paying off the mortgage will likely be used to buy liabilities rather than assets

In the end, I'm doing a mix of both. Investing 20% of my income and then putting the rest into the mortgage.

[lawrencer]

Another fabulous video.
I payed all my mortgages of many years back .
I have always earned good money and all my properties, have never been empty.
As I have always had interest only mortgages, wasn't in my interest to not pay off as quickly as possible, regardless of the market.
I know a lot of landlords who have sold up, for all sort of reasons.
Didn't take my advice about over payments, as the intrest was very very low .
Unfortunately some are having problems with Tenants and high interest rates.
Iam so glad I stuck to my plans ❤❤❤
Have a wonderful day

[ajaaskelainen]

but did you mention the compound effect on money invested in stocks? Stock investment compounds, while mortgage doesn't.

[danteburritar]

On a superficial or purely financial level, interest saved is is as good as interest earned. So if your mortgage is 2% and you don’t mind risk then invest to hopefully get the 6.66%. If your mortgage is 6% and you are more risk averse then pay off the mortgage. Psychology can be a big factor many people - not many can hold their nerve when the market is down and they are nursing a loss of £250k and many value very greatly the house being paid off - I imagine the de-stressing from that would be significant and would even lead to better health. Another thing to factor is not having all your eggs in one basket = house paid off no-one can take it from you - I don’t think I’d like to have a £1million mortgage and £1million invested; better to have 500k invested and a 500k mortgage.

[jackywang]

thanks for the calm logical analysis. Love the vibe

[susanlewis]

Great video. Congrats on hitting 50k subscribers 🎉

[awild]

If you're currently still on a low fixed rate mortgage but can afford to pay the extra it makes much more sense to put that extra into a savings account with a higher interest rate and use it when you come to remortgage to improve your loan:value ratio. It also means the cash is still there if you need it. Your mortgage provider wont give you back any of the cash you used to overpay your mortgage.

[WhistleMaster]

Use a simple mortgage calculator. See how much your prepayment will ACTUALLY save in total interest. That is the real money that you prevented leaving your kitty. Money saved is money earned! Paying off high interest mortgage is a no brainer!