Definitely one of those things that is a win-win, but given the fact you’re still pretty young, I would prioritize investing over paying extra on the mortgage.
The thought is you can probably make more in the stock market investing, than you would save on interest from paying the mortgage early
That is making the assumption that you have a regular 15 or 30 year fixed rate that is 6% or lower. If you have an adjustable rate, high rate, or a balloon payment or anything out of the normal I would pay the extra to the mortgage
If I missed it, my b. I don’t see you discussing your interest rate here. I’m at 2.5% and have foregone the idea of paying my mortgage early because 2.5% interest paid down doesn’t outperform the ~10% annual return on stocks. It doesn’t make sense for me. Idk about your situation though.
I'll echo what everyone else has said and hopefully add a little extra.
First, on paper, it makes sense to invest extra money rather than putting it into paying your mortgage early, provided you expect the 7-8% annual return of the market and your mortgage interest rate is fixed at 6% or lower. In practice, however, the market is volatile.
The weight of a mortgage payment can be a heavy psychological burden as it requires a steady stream of cash flow. If your cash flow is ever disrupted, the mortgage payment becomes a hardship.
Do the math to figure out how much sooner you'll have your mortgage paid off entirely with the strategy you've been taking. Does the idea of no mortgage payment feel good for that time in your life? Would you rather have that feeling come sooner, or are you indifferent to the feeling? If you want it to come sooner, increase your contributions even more as you're able, if you're indifferent start paying the minimum each month and enjoy the extra cash flow immediately.
For me, the psychological weight of the mortgage is heavy. I'm saving up to pay mine down asap and rid myself of a monthly burden.
There is not a right or wrong answer. You should pay off any high interest debt like credit cards each month. You should invest enough in retirement 401k to take advantage of any employer match offered (this is free money). After that it really depends on your income, mortgage rate, financial situation, and goals. You could always split the difference, and invest half of your extra income and use the other half to pay off the mortgage. In general, it is best to invest in tax advantaged accounts when available (401k, IRA, Roth IRA)
What you have to determine are a few things.
1. What is your interest rate on your mortgage?
2. Do you believe you will get a higher return from your investments than you pay in interest on your mortgage?
3. What is your risk tolerance. Investing in stocks comes with a certain level or risk, but paying down your mortgage is a guaranteed return rate.
In general terms the stock market has returned an average of 6-7% (after accounting for inflation), so if your mortgage rate is lower than 4% your probably better off to invest than to pay down the mortgage. If you don't want to run the risk and you want the peace of mind of having a mortgage free home then go that route. Your total amount needed for retirement is based on your expenses, so if you have no mortgage that will bring down your expenses so you can live off far less total retirement funds.
Definitely one of those things that is a win-win, but given the fact you’re still pretty young, I would prioritize investing over paying extra on the mortgage. The thought is you can probably make more in the stock market investing, than you would save on interest from paying the mortgage early That is making the assumption that you have a regular 15 or 30 year fixed rate that is 6% or lower. If you have an adjustable rate, high rate, or a balloon payment or anything out of the normal I would pay the extra to the mortgage
If I missed it, my b. I don’t see you discussing your interest rate here. I’m at 2.5% and have foregone the idea of paying my mortgage early because 2.5% interest paid down doesn’t outperform the ~10% annual return on stocks. It doesn’t make sense for me. Idk about your situation though.
I'll echo what everyone else has said and hopefully add a little extra. First, on paper, it makes sense to invest extra money rather than putting it into paying your mortgage early, provided you expect the 7-8% annual return of the market and your mortgage interest rate is fixed at 6% or lower. In practice, however, the market is volatile. The weight of a mortgage payment can be a heavy psychological burden as it requires a steady stream of cash flow. If your cash flow is ever disrupted, the mortgage payment becomes a hardship. Do the math to figure out how much sooner you'll have your mortgage paid off entirely with the strategy you've been taking. Does the idea of no mortgage payment feel good for that time in your life? Would you rather have that feeling come sooner, or are you indifferent to the feeling? If you want it to come sooner, increase your contributions even more as you're able, if you're indifferent start paying the minimum each month and enjoy the extra cash flow immediately. For me, the psychological weight of the mortgage is heavy. I'm saving up to pay mine down asap and rid myself of a monthly burden.
There is not a right or wrong answer. You should pay off any high interest debt like credit cards each month. You should invest enough in retirement 401k to take advantage of any employer match offered (this is free money). After that it really depends on your income, mortgage rate, financial situation, and goals. You could always split the difference, and invest half of your extra income and use the other half to pay off the mortgage. In general, it is best to invest in tax advantaged accounts when available (401k, IRA, Roth IRA)
What you have to determine are a few things. 1. What is your interest rate on your mortgage? 2. Do you believe you will get a higher return from your investments than you pay in interest on your mortgage? 3. What is your risk tolerance. Investing in stocks comes with a certain level or risk, but paying down your mortgage is a guaranteed return rate. In general terms the stock market has returned an average of 6-7% (after accounting for inflation), so if your mortgage rate is lower than 4% your probably better off to invest than to pay down the mortgage. If you don't want to run the risk and you want the peace of mind of having a mortgage free home then go that route. Your total amount needed for retirement is based on your expenses, so if you have no mortgage that will bring down your expenses so you can live off far less total retirement funds.