The Real Estate Edge

The Real Estate Edge

Is it better to pay off a mortgage or invest?

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For most people, their mortgage is the only thing drawing them back to invest for their future. If you’re one of those, you probably think you should pay off your house immediately or reserve the money to get passive income.

 

The truth is, there is no definitive answer for this dilemma. Paying your mortgage has its pros and cons, reserving money for investing. To help you decide, we came up with their advantages and disadvantages.

 

Advantages of paying off your mortgage

 

The primary benefit of paying off your mortgage is the ease and comfort it can give you. You can live in your house without worrying that you may lose it someday.

 

Aside from this, when you pay your mortgage earlier, a significant amount of interest can be deducted, which you can use for investing. A fully paid property also becomes an instant asset that can help you acquire other property.

 

Disadvantages of paying off your mortgage

 

When you use your money to pay off your mortgage, you’re losing time to get higher income in your investments. The earlier you start in the stock market and other passive income methods, the more you earn through compounding methods.

 

Aside from this, you may lose tax deductions in your mortgage. When your loan matures, it can be subject to refinancing, including tax deductions. 

 

Advantages of investing early

 

Early investment gets higher returns. For many years, stock market interest has always been higher than mortgage interests. In short, you can gain more in having stocks than having a house.

 

The liquidity of stocks is a significant factor, too. It’s always better to have easily accessible money in case of emergencies.

 

Disadvantages of investing early

 

The biggest downside of choosing investment instead of paying off your mortgage is the increased debt. You have to shoulder paying your investment and your mortgage simultaneously.

 

Furthermore, investments always carry risks. There is no assurance that you’ll get enough income in your assets to pay off your debts, including your mortgage.

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