Paying Your Mortgage Vs Investing Your Funds

Except for people who work as loan sharks, nobody likes debt. It’s a scary word with scary consequences. However, if there’s one type of debt you do want, it’s a mortgage. Unless you’re a professional athlete or tech guru, you probably don’t have a couple of cool millions lying around. That means you’ll have to borrow money to buy a home.

Mortgage Home

Once you’ve secured your mortgage, your initial response may be to pay it off as quickly as possible. The idea of making monthly payments for the next 30 years may seem daunting and the road to owning your house may outright seem paved with debt and despair. But, before you rush to pay off your mortgage all together and invest your money, there are some things to consider.

Let’s say you’re budgeting an extra $5,000 yearly to invest in something. That something could be anything from the stock market, a business, TFSA or RRSP, your daughter’s wedding, etc. These “somethings” are all important and in some cases may be more important than putting that extra $5,000 towards your mortgage. On the other hand, that $5,000 could get you one step closer to being debt-free and fully owning your home. So, what do you do? Pay off your mortgage early, starting with that extra $5,000, or invest it?

Pros to paying off your mortgage early:

You can save money on interest costs (find out what your prepayment privileges are before you throw a big lump sum at your mortgage, just in case)
Your cost of living will be reduced since you won’t have to put a certain amount of money towards your mortgage every month
Your only debt will be your credit cards and vehicle payments (if you have them).

Cons to paying off your mortgage early:
Your ROI (return on investment) will be quite low
You won’t see savings until your home is fully paid off and they might not be as much as you think

Pros to investing your money:
Building savings is essential and you may be able save a larger sum of money if you invest rather than by paying off your mortgage early
You can pay-off higher interest debts like credit cards easily
If you invest your money, you are essentially setting up a rainy day fund to be used as you wish. You can send your kids to university, pay for renovations, start your retirement fund, etc

Cons to investing your money:

Depending on what you’re investing in, you may see little to no ROI
Yes, you’re building up your portfolio, but you still have to pay your monthly payments to the mortgage broker anyway.

There is no clear-cut answer to the conundrum of paying off your mortgage vs. investing your money. In the end, you should take a long hard look at your financial situation and see what makes the most sense. Everyone’s monetary state is unique and if you feel that paying off your mortgage is worth more than investing your money, go for it. Because ultimately the decision should be yours.

"I am an avid researcher of world economy and market development. I find these areas to be extremely exciting, as changes occur nearly every day! It is important for me to keep up to date in these trends, so I make sure to stay on top. During my pastime, I enjoy utilizing my creative skills to snap photos of beautiful landscapes with my Canon EOS 5DS R. I’m also passionate about blogging. Seeing as my mother has told me that I was a great writer, even at the age of 8, I am certainly not surprised!

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Economic Analyst
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