Are you a young professional who is looking to maximize their finances? If so, you will likely be faced with a particularly difficult decision shortly after buying your first home. When you notice that you are making a substantial amount of money or when you have built up an impressive savings account, you will often be forced to choose between paying off the remainder of your mortgage or taking advantage of other investment opportunities that come your way. The question is, which option is the most financially-savvy? If you’ve been asking “Should you pay off your mortgage early?”, we investigate below.
When to Pay off Your Mortgage?
A mortgage is an example of ‘good’ debt. It usually makes better financial sense to buy your own home as opposed to continuing renting for the foreseeable future. However, the cost of repaying a mortgage can be mammoth, especially if you did not manage to secure a prime interest rate with your chosen lender. This is the reason why it often proves beneficial to pay off your mortgage faster than initially agreed upon. After all, by the time your mortgage has been paid off in full, you will have less stress and plenty of extra income to focus on investments going forward.
When to Invest?
Despite most people arguing that paying off your mortgage is always the better choice, especially considering how unpredictable most investments can be, there are certain instances when it can make more financial sense to invest instead. In a situation when the rate of return for the investment in question is predicted to be higher than that of your mortgage interest rates, it may work in your favor in the long run to invest your savings or your disposable income.
Ultimately, a great finance app such as CalendarBudget can assist you in making this big decision by helping you to keep track of your spending, your debt, and your income.