The Mortgage or Investments: What Should You Do With That Money?

Should you find yourself with a sizable chunk of savings or come into a windfall that involves a nice sum of cash, you have to ponder carefully what to do with it. In many cases, most people would at least consider paying off their mortgages early to do away with one of their biggest expenses. However, while in theory it may sound like a good idea, paying off your mortgage early may not be your best option.

Like most things in life, there are two sides to every story. Here we will cover the ins and outs of paying (or not paying) off your mortgage early.

Why You Shouldn’t
Unless you already know that if you don’t put your money to good use right away or risk spending it frivolously, you might be wiser to invest that cash into something that can grow over time. Likely an investment will bring more of a return than the opportunity to capitalize on low interest mortgage rate. Obviously returns on investments are not guaranteed. You’ll need to seriously consider which investments you would make in place of clearing the mortgage so that you invest wisely. Unless you are close to retirement and want to rid yourself of a house note, it is probably not in your best financial interest to pay off the mortgage early. Also, by paying off your mortgage early, you will also lose your tax deductions for the interest you were paying on that mortgage for years to come.

Why You Should
As previously mentioned, if you foresee yourself spending your windfall on junk you don’t need, you may want to consider putting that cash down on your mortgage balance. The chief benefit of paying off your mortgage early is that you no longer have to worry about meeting this financial obligation. Knowing you own your home can bring great piece of mind. Having said that, security of knowing you own your home may not be on your agenda. You may prefer the security of knowing you have invested your cash to grow your wealth.

Essentially, to pay or not to pay will be a personal decision, depending on what kind of financial security you are seeking in your life. There are both positive and negative aspects of each scenario and a close look at your own long term finance goals will be your starting place for making that decision.