![](https://spicytrends.com/wp-content/uploads/2020/10/Choice-1-1000x597.jpg)
Pay Your Mortgage Early or Start Investing? Your Choice Would Boil Down to this One Factor
![](https://spicytrends.com/wp-content/uploads/2020/10/Choice-1-1000x597.jpg)
So, you’ve bought a house and knocked off an item on the list of your long-term goals. Now, your next focus is paying off the mortgage you took out to afford your home.
But what about other financial goals like growing your wealth or saving up for retirement? If you’re wondering whether you’d be better off tackling your mortgage first or starting an investing habit, you might want to listen to the advice of certified financial planner Brian Fry.
For him, your decision should come down to interest rates. Putting things in simple terms, it’s better if you pay your house loan first if your mortgage rate is higher than what you’ll make investing your cash.
Best Things You Can Do
![](http://trueedition.com/wp-content/uploads/2020/09/Choice-2.jpg)
JETACOM AUTOFOCUS/Shutterstock: Refinancing means getting a new mortgage at a lower rate to replace your first one
After running a simulation that considers various scenarios for a homeowner, Fry found that the best course of action you can take is to refinance your mortgage to a 15-year one at the interest rate of 3.19%.
This is because the rate of historical average stock market return is lower than the average mortgage interest rate. Thus, paying off your mortgage early after refinancing, which further drives down the interest rate, is the most sensible option for now.
Worst Things You Can Do
![](http://trueedition.com/wp-content/uploads/2020/09/Choice-3.jpg)
Africa Studio/Shutterstock: You can save thousands of dollars in interest over the life of the loan when you refinance
Meanwhile, Fry warned people against spending their extra money instead of investing. Doing so would not get you closer to your goal of building wealth.
He also reiterated the perks of refinancing your mortgage. Even if you aren’t planning on paying your house loan aggressively to be debt-free earlier, you’d still benefit from the lower rates you’d get by refinancing.
You can save a lot of cash as you’d be left with a significantly smaller monthly payment once you’ve been approved for a new mortgage. Fry said that refinancing is a particularly good option for homeowners that have no plans of moving any time soon.
Running the Numbers
![](http://trueedition.com/wp-content/uploads/2020/09/Choice-4.jpg)
Don Mammoser/Shutterstock: Make sure that you have your savings and retirement accounts in order before worrying about investing
The certified financial planner got to these conclusions after making calculations based on a scenario where a homeowner nets an extra $24,000 annually after taxes. The homeowner is already 15 years into their mortgage with over $282,000 left to pay off at a 5.84% interest.
The simulation assumed that the homeowner already has other aspects of their finances covered from paying off other debts to having an emergency fund. Another assumption is that they’ve diversified their nest egg as well.
That said, Fry notes that paying your mortgage early or investing shouldn’t be your top priority yet if you haven’t gotten your overall finances in order.
More in Finance
-
`
The Unique Tradition of the SAG Awards: No Hosts!
The Screen Actors Guild (SAG) Awards, a prestigious event in the entertainment industry, has a unique tradition that sets it apart...
March 9, 2024 -
`
Essential 2024 Startup Know-How for Women | Beginning Your Business Journey
Forget the tired trope of the lone wolf entrepreneur. Today, women are shattering glass ceilings and redefining what it means to...
February 27, 2024 -
`
Microsoft and OpenAI Sound Alarm Over AI Hacking
A recent joint study by Microsoft and OpenAI raises concerns as it unveils attempts by state-backed hacker groups to exploit AI...
February 25, 2024 -
`
Invest with Confidence: Identifying 5 Key Company Traits for Success
When investing hard-earned money in stocks, we all want the reassurance that comes from placing bets on reliable horses. But how...
February 15, 2024 -
`
Roger O’Donnell’s Heartfelt Message to Morrissey Amidst ‘Medical Supervision’
When news broke that Morrissey, the iconic frontman of The Smiths, was placed under “medical supervision for physical exhaustion,” the music...
February 10, 2024 -
`
Six Flags and Cedar Fair Merger: A Thrilling Venture Under DOJ Scrutiny
Picture this: two giants of the amusement park world, Six Flags Entertainment and Cedar Fair, coming together in a colossal merger,...
February 3, 2024 -
`
A Peek Inside NASA’s Latest Supersonic Aircraft, the X-59
In the annals of aviation, breaking the sound barrier has always been a loud affair. But NASA, in partnership with Lockheed...
January 22, 2024 -
`
The Easiest Personal Loans to Secure Your Financial Freedom in 2024
Embarking on a journey toward financial stability often requires a helping hand, and personal loans emerge as versatile allies in this...
January 21, 2024 -
`
Emily Atack Baby Joy: A Peek into Her Life with Boyfriend Dr. Alistair Garner
New beginnings and a tiny miracle: The year 2024 has kicked off with a beautiful surprise for fans of Emily Atack,...
January 10, 2024
You must be logged in to post a comment Login