Invest or Pay Off Mortgage? The Answer is Changing...

Invest or pay off the mortgage? This is a question that has been pretty easy to answer for the most part...up until recently. Now that interest rates for 30 year fixed rate mortgages are climbing at alarming rates, and the fed has only increased their rates by 1/4 point, we could see much higher mortgage rates by the end of 2022.

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[Kuulei]

Paying off our mortgage prior to retirement has been so freeing. We are debt free. The peace of mind was worth it.

[Jeannified]

Such a beautiful and peaceful area for your “walk and talk.” I loved hearing your feet crunch on the ground and the birds tweeting! As for the subject…very important! I know I told you a while back that my cousin and her husband are having some regrets about having sold their beautiful home with pool in a nice Tampa neighborhood. They are currently living in tiny apartment.

[nickfdsasdf]

Try not to look at the interest rate of the mortgage. A typical 30 year with 3% down will be about 70% interest. Look at an amortization schedule. Your first 7 years of payments are going to be 60-70% interest. A $1, 000 payment will likely have $700 of that go straight to interest.

A mortgage is front loaded interest and not calculated the same as stock returns or credit cards. What’s worse is the average mortgage life is only about 7 years before someone refinanced or buys a different home. This restarts the process and you’re back to paying a massive amount of interest and never paying much down on the principle.

The ONLY reason to invest first is if you’re an experience RE investor you’re leveraging equity to accumulate more income producing assets. Even so, it’s high risk and low reward depending on how leveraged you are.

Keep it simple, buy the cheapest housing possible with a large down payment and a maximum 15 year mortgage and stop paying 70% interest to the bank. A $300 monthly stock purchase is not going to earn more than $700 a month for you.

[waitaminute]

For me, paying off my mortgage has not only felt freeing, it's helped me get through some tough times both personally and financially.

[JohnHoganN]

As you say Michael, the interest rates post-increases will still pale in comparison to what we saw in the late 80s and early 90s.

[aggierowe]

This is great advice, wish more people would heed it. It’s common sense for us folks that are retiring soon. And for the younger folks, it’s advice that most aren’t told.

[Falconlibrary]

As interest rates rise, it makes more and more sense to pay off your house.
I bought my first house in the 1980s at 12% interest (Volcker years at the Fed, when he was fighting stagflation)
I worked two jobs and lived very frugally to get the house paid off in a little under 5 years.
Living debt free (owning your home free and clear etc) is the best of all.

[dariojob]

Thank you for that video. Helps me a lot

[lifewithkaty]

Paying off a home early is always the best play. Can’t get better than a debt free life! Then you have more funds to throw into investments when you don’t have a house payment hanging over you.

[classics-wzbz]

watching this 1.5 years later and 30 year fixeds are nearly double time of this video at 8%. i dont see housing going down anytime soon...infact i think interest rates will have to come down (maybe by 2026) before we see housing prices come down. even then housing prices will most likely just remain flat for the next 5 years or so to combat the spike seen in 20-21.

[thehardknockstate]

Great information. So much truth in what you're saying in this video.

[doubleoseven]

Hey Michael I’ll be in Miami at ultra music festival this weekend you going?

[Gigi_fromNY]

Michael question- let’s say I want to buy an apartment now in Miami- I’d put 25-30% down- is it smart right now to get a mortgage? With everything happening in the world- the NWO etc which im 1000% sure is happening and as per Klaus Schwab “you will have nothing and be happy” how risky it is to buy now? What do you think?

[Johnnylad]

Thanks for sharing for this! I honestly prefer renting and putting all my money on crypto currency, (Hex / Helium / Planetwatch) to name a few.