Pay Your Mortgage Off Early or Invest the Money

Would it be wise to pay off your mortgage before the term is over? Or should you invest the extra cash that you have? No matter what your personal feelings are here, the answer should be, “It depends.”

One reason that no one can argue with when it comes to paying off your mortgage early is that you get some peace. There are people that feel that it's all right if they can't buy designer things as long as they don't have a debt on their house. If having peace of mind is foremost for you, then nothing anyone says should change your mind.

You'll be able to earn more on the interest that you would have paid if you had kept to the mortgage term. Although interests are low and are usually tax deductible, it is still best for some to have that money already in hand rather than theoretically earning it.

Most people intend to invest the money that they can salt away from the lower mortgage payments, the sad fact is that most of them never do. Paying off your mortgage frees your asset – your house.

If you do decide to invest the difference, most people would compare the low interest rates they save on to the higher interest rates that could come from investing the money in -T-bills and other instruments. But, can you predict what you'll earn? Or predict how stable those rates will be? None of these are guaranteed, so you'll need to weigh your options carefully.

Have you factored in inflation? Over the years, especially in times of crisis, the value of money decreases. This means that your long-term mortgage payments will be relatively "cheaper" over the years as long as your monthly payments are locked in.

So, what would be the best option for you?