🏠 📈 When does it make financial sense to pay off a mortgage early vs. investing?
🏠 📈 When does it make financial sense to pay off a mortgage early vs. investing?
If one has the possibility to pay off the remainder of their mortgage when does it make sense to do that ?
I'd like to consider also that future mortgage payments would go into the market as well.
It might be that financially it always makes sense to "stay in the market" but if the delta is small enough, I might consider it worthwhile for the "emotional toil" having debt costs.
If one has the possibility to pay off the remainder of their mortgage when does it make sense to do that ?
I'd like to consider also that future mortgage payments would go into the market as well.
It might be that financially it always makes sense to "stay in the market" but if the delta is small enough, I might consider it worthwhile for the "emotional toil" having debt costs.
3 Answers
You may be interested in a mortgage recast. It's a lesser known option, and the loan companies don't super like to do it, but you can put a large chunk of money into your principal of your existing mortgage, and the lender will recalculate the monthly payments based off that new loan amount using your original interest rate and terms. This means if you have a low-interest rate from the covid days, you can dump $200k into your mortgage and keep that low interest rate, but not pay off the whole thing.
Timeless middle class problem. We've got a few takes on it:
- https://finfam.app/mahmoud/views/refi-vs-invest
- https://finfam.app/mahmoud/views/should-i-pay-down-my-mortgage-or-investsave-a-lump-sum
- https://finfam.app/heyfinfam/views/mortgage-payoff-vs-market-investment
Of course every situation is different, so you can feel free to check the source and/or remix those.
For a less opinionated, more textbook take, I like https://trgmc.net/
It's hard to do but I created https://fzakaria.github.io/mortgage-payoff-calculator/ but it's also still incorrect. It doesn't account for:
- Tax credit for mortgage interest payments
- Capital gains
I'm not sure yet how to model them both but this is a good start.
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