Is it Wise to Pay Off Your Mortgage Early or Invest More?

Pay off your mortgage or invest more? Paying off your mortgage and being debt-free is a great milestone to strive for in your financial life, but should you seek that ahead of saving aggressively for retirement? Mike, Josh, and Kevin answer this financial planning debate and answer your questions in this week’s episode.

Season 4 Episode 9

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[amznprime]

What's a Podcast? It's something that makes an easy and simple question an hour talk show.

[karenwallace]

Start compound investing asap and, assuming you have a low mortgage rate, don't pay it off early. If you wait to start investing until after your house is paid off, you're missing out on a huge amount because time is the key. Pay off other debt but keep the mortgage and invest as much as you can. You'll have a huge nest egg by the time your house is paid off in thirty years or less.

[PeaceDayCortez]

I put my extra $1k into a high yelled account monthly all year long. It also doubles as an emergency fund for unexpected yearly expenses. At the end of December I make a lump sum payment on my mortgage. Than in January I start all over. I drop any and all windfalls in there too. As Dave Ramsey says always keep 1k, so I never drain it past 1k. My house will be paid off in less than 4ys using this method. I already have 2ys worth of income saved in case I lose my job, so this mortgage account is in addition to that account. I would never get a HELOC, when I pay my house off my mortgage payment is going back into a high yelled account that I can access with minimal penalties in the event I need it. I’m my own bank. I would never leverage my paid off home for a HELOC, the bank will find away to take it, screw that! 🧐

[rcox]

If you can guarantee that you can invest the $1, 000 and get better than a 4% return plus the tax savings. That’s the math, invest it. If not, pay down the mortgage. Assumes you don’t need the money for anything else and you have no other debt. How might you guarantee a return off more than 4%? Deferred compensation. That is a “return” of or savings of whatever your tax rate is plus what the money earns in investments. Max out your deferred comp first. Then pay down your mortgage, IMO.

[rimmyreddy]

Well right now it’s better to pay off the house since the market is at an all time high. That should factor in. Right now u have to expect a 3 to 4 percent return a year

[robertlulek]

of course The Best of both worlds would be to pay down the mortgage and invest at the same time if you have the financial capability to do so

[Nilsosmar]

It's not an either/or question. If you have money to pay off your mortgage early, do it. (Put the money toward paying down the loan's principal as early as possible.) Then, when it's paid, and you own your house free and clear, start investing in other products.

Some people say that prepaying your mortgage is just "giving extra money to the bank, " but this statement is ridiculous (though I'm sure it makes the banks happy if it fools people into not paying their mortgages off early). (The banks make out like bandits when you DON'T pay your mortgage off early.) When you pay your principal, you are the beneficiary. You are trading the payments for full ownership in your house.

For example - let's say you buy a half million dollar house, and your payment is $2000/month. You work out a budget and realize that you are earning $2, 000 a month in addition to this payment, to spend on "some kind" of investment. So you use it to pay off a 30 year mortgage in 5 years. So you put down $2, 000 a month in addition to your usual $2, 000 payment.

Depending on the size of your mortgage, by the end of 5 years you'll have likely saved yourself hundreds of thousands of dollars in interest. This savings of hundreds of thousands of dollars is a MASSIVE return on your investment. And you then NO LONGER HAVE MORTGAGE PAYMENTS. You have total security... you can never lose your house in a foreclosure... and have developed the habit of paying your $4, 000 a month (mortgage + prepaid principle) into an investment product. Plus, you own a half million dollar house free and clear.

At this point, you start putting the $4, 000 a month you've been paying, into some other investment. It could be real estate, stocks and bonds, or whatever else you want.

[designanthology]

Oh my goodness just answer the freaking question

[scottstewart]

The mortgage pay off question wasnt really answered at all

[jdonalds]

In most cases if the gap in interest rates is big enough it will make sense to invest rather than pay off the mortgage.

[moen]

I like Dave Ramsey’s baby steps approach. After investing 15% of your income in a retirement account payoff your mortgage.

[accast]

7 minutes in and I was thinking the exact same thing!😳

[KyokushinNidan]

Sorry but don’t have the patience for 50 minutes of hypothetical debate. The couple is probably looking at the cash flow after payoff to take them into retirement. End of story.

[dwaynerudkavitch]

the guy in the middle is the worst. This is bad. Are you guys a church group? Hence the huge suscriber base. lol