Pay off the Mortgage or Invest? The Answer is Clear.

One of the biggest financial dilemmas is deciding whether to invest your money or focus on paying off your mortgage. If you’re grappling with this question, you’re in the right place! In this video, I share my unique perspective after paying off my mortgage two years ago and why it was one of the best decisions I’ve made.

STUFF I RECOMMEND!*
Personal Finance

Saving Money & Grabbing Deals

#financialeducation #financialindependence #mortgage

🌟 Key Insights:
🏡 Liability vs. Asset: Understanding the difference between a primary residence mortgage and a rental property mortgage.
📊 Amortization Schedule: How additional payments can significantly reduce your interest payments and help you pay off your mortgage early.
💵 Investment Comparison: What if you invested that extra money instead? We compare paying off your mortgage early to investing in the S&P 500 from 2000 to 2008.
🧠 Emotional Impact: The psychological and financial stress of maintaining a mortgage during economic downturns.
🚨 Emergency Fund: The importance of having an emergency fund and balancing investments with debt payoff.
📈 Financial Freedom: The power of choice and how paying off your mortgage can give you financial freedom and flexibility.

💡 Discussion Points:
🤔 Should you focus on investing or paying off your mortgage first?
📉 How do market downturns affect your investment vs. mortgage payoff strategy?
💼 Why having an emergency fund is crucial while aggressively paying off debt.

🌟 Join me as I delve into these topics and share my personal journey of paying off my mortgage. Learn how you can achieve financial freedom and make informed decisions about your money.

📢 If you found this video helpful, share it with others, and don’t forget to subscribe for more insights on personal finance and financial independence. Ready to explore more calculations and strategies? Check out our next video for updated insights and practical advice. See you there!

Chapters of Today's Video on Pay off the Mortgage or Invest?
0:00 - Introduction: Invest or Pay Off Mortgage?
0:19 - My Experience: Paying Off My Mortgage
0:33 - Understanding Mortgages: Liability vs. Asset
1:09 - Mortgage Payment Strategy: Amortization Schedule
1:37 - Case Study: $300,000 Loan at 2.5% Interest
2:17 - Additional Payments: Paying Off Early
2:52 - Analyzing Interest Payments
3:43 - Total Interest Savings
4:17 - Investment Comparison: S&P 500
4:44 - Investment Results: January 2000 to October 2008
5:36 - Tax Implications: Investments vs. Mortgage
6:03 - Realizing the True Cost of Mortgage Interest
6:42 - The Uncertainty of the Stock Market
7:04 - Emotional Impact: Portfolio Drops
7:45 - Mortgage-Free: Avoiding Financial Stress
8:05 - Importance of an Emergency Fund
8:31 - Balancing Investments: 401(k) Contributions
9:05 - The Power of Financial Freedom
9:26 - Conclusion and Next Steps: Today’s Calculations

Should you pay off your mortgage or invest in the stock market? This video gives a clear answer to help you make the best financial decision for your future. Find out the pros and cons of each option and how to make the most of your money.

*Disclaimer: Bob is not a financial advisor. Please contact a professional financial advisor prior to making any decisions. Some of the links and other products that appear on this video are from companies in which Bob Sharpe earns an affiliate commission or referral bonus. Bob Sharpe is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.

[michaelcooper]

You need a strong foundation to build your wealth. Having a bank own your home sucks!

[xmusic]

I would rather have the peace of mind of a paid off home.

[winniethepoohandeeyore]

Been overpaying the principal ever since our 1st payment was due 3 years ago. A paid for home, double homestead exemption, 65 year olds and older who get less than 25k a year property tax exempt, 100% disabled vets property tax exempt, Current military property tax exempt. PRICELESS!

[MurangShaBu_MahalNaBiGas]

I would pay the mortgages first because the interest against me is guaranteed but the investment growth or interest is not.

[kckuc]

Excellent video, plenty of haters out there to pay off mortgage. They also say they will invest that money but they don’t.

[kinglucas]

Your information is so helpful! Thanks!

[johnkelly]

Thanks so much. You made it very easy to understand

[dodo_]

Great video as always❤ happy to see you gaining popularity 🙏

[truckertra]

My guy bobs back with another important question I been thinking about for a while

[hulkman]

The reason to pay home early you will have. More cash flow to invest

[kw]

When you pay off your house, you can literally work part time and make it work

[Fatezav]

Based on the example, your method of paying extra monthly to clear off the loan earlier does work better.

However, for those who have a lump sum, such as \$100, 000 from an inheritance, investing that amount in the S&P 500 could yield faster and greater returns compared to using the lump sum to pay down the mortgage. This approach takes advantage of compound interest, potentially providing significant growth over a shorter period.

[NiranjanBendre]

We paid off in 2018… we think it is best to not have mortgage on primary home… yes could have invested that money… yes could have earned more money that way… yes maybe… but the risk is not worth it… YMMV

[Ultrajamz]

Few things 1) You could have done the investments in a roth ira and defer the benefits a bit but the contribution could be withdrawn if needed. So the investment option is not necessarily having its profit taxed. 2) I think most are saying now that inflation will be worsening overall with the amount of debt the nation is in - meaning markets and assets will get inflated so the nominal price of stocks should go up and ultimately it makes paying debt “easier” if wages inflate with it, which they should (though usually not enough to cover the inflation). 3) If you end up in a bind, you can pull the contribution from the roth ira - just maybe consider less risky investment mix now that you can plop the money in the money market and make 5%.

[dddnegre]

The graph of investment are in a log scale, that’s very counter-intuitive and makes the viewer think that the latter gains are residual while they are the biggest!!!

[matthewclark]

Hey Bob, i have a question. I've been wondering what the difference would be if you instead put the extra payments into a high yield savings account, then withdrew it and paid off principle at the end of the year. Thoughts?

[skatershaner]

Paying down the mortgage may mathematically work out over the 8 year span you picked, but the longer that time draws out, the market will win over that cheap rate. The opportunity cost of having that money tied in the home and missing out on future returns is huge. Your example is from 2000-2008, but conveniently ignores the amazing bull run that occurred over the next decade. The person that invested in the market would pull way ahead even just a few years after 2008.

Now, if the person is in their 50s or 60s at the start of 2000, paying down the mortgage makes a lot more sense because they don't have the time to whether market storms.

[nateholio]

My dilemma is: keep maxing my ira every year (put about 140 a week in it) or pay down my high 6.8% mortgage. My budget is pretty tight so I unfortunately can’t do both.

[thomaschew]

One of my co-workers told me I was foolish to pay off our mortgage early (in 12 years). Our home was paid off in 2017. This individual is currently 73 years old is still working (nothing wrong with that) but he still has a mortgage, 7 years after my place was paid. Because he wishes his home was paid off, he doesn't talk about that anymore, but I told him yesterday that we have 1 years expenses in a HYSA and are starting to stack small amounts of gold and silver. He tells me that I'm going to lose my shirt on that. I'm maxing out the company 401K he is putting 15% into it. We (Sue and I), have a savings rate of 50% my friend even with SS and his salary is saving 15% of his salary in the company 401K because he is desperately paying down his mortgage and car payments. To that I say it's not just are you or are you not pay off your mortgage early? The real question is do you have the discipline to either pay off your mortgage early and/or actually invest the money that might be used to pay off your mortgage early?

[zyhdlcx]

We live in a $525, 000 payed off home that we purchased for 170, 000 in 2015 in cash. Our taxes ins and hoa are 330 a month. We live on 25% of our take home.You will always win with a paid off home versus investing. You can learn to trade and beat the s&p by far after you pay your house off from our experience. Have a great day 😊