Should I Pay Off My Mortgage or Invest?

Another most often asked question that is related to the investment topic is, should I pay my mortgage or invest the money? And it is always an interesting question and the answer always varies.

Not one answer fits all

It depends on many factors. We need to factor in the age, motivation, risk tolerance, market conditions, the structure of the loan and how stable is your source of income.

Taking myself as an example and my approach, I’m 45 and took on a mortgage for 25 years.

The bulk of my income comes from the service I provide as an IT contractor and the rest of my income comes from various other side hustle projects.

Considerations

Before considering paying the mortgage early or investing, I first look at my current finances and where I stand based on the baby steps from Ramsey.

• Emergency funds – At the moment I have about 3 months of emergency funds saved and I slightly bump up this figure every month
• No debts – I have zero consumer debts and only the house mortgage
• Retirement savings – here in New Zealand we have a Kiwisaver scheme to which I contribute manually
• College/university funds – I have 4 kids, I wasn’t able to save funds for my eldest education and hoping to help pay the student loan after. However, I did start Kiwisaver for my 2 kids and 1 with an index fund savings. So these are funds that grow over time as I put more money into them monthly.
• Pay off mortgage
• Build wealth and give to charity

The last three steps are where I don’t follow the baby steps and make my own.

For the college/university funds, we are fortunate that here in New Zealand, there is 0 interest on student loans.

I am increasing my net worth by investing in term deposits, the stock market, and crypto. As I do not want the house equity making up the bulk of my total net worth. I have a modest stock investment which is focused on dividend investing, I sometimes use DRIP(reinvesting back to the market) or use dividend income to pay for some wants.

Summary

As for my own answer, if I should pay off the mortgage or invest? I’d put the money into investing.

I have a fixed mortgage loan and making the extra payments is only available before renewing the term. I am allowed to make a 5% extra payment to the loan amount. My strategy is to save up to get the 2-3% extra payment before renewal and the rest of the income I would continue to invest.