![]() But if you’re the average American, you’re paying less than 4%.Įven being conservative, a total stock market or S&P 500 index fund is going to earn more than 4% annually over a decade or more.įor most people, using your extra cash to service debt at a manageable interest rate comes with a major opportunity cost. You have to consider the interest rate on your mortgage. The further you are from retirement - in age and dollars - the easier the decision becomes. Why You Should Invest Instead of Paying Off Your Mortgage ![]() Consider Checking These Off Your Financial List Before Investing or Paying Your Mortgage.Why You Should Pay Off Your Mortgage Instead of Investing.Why You S h ould Invest Instead of Paying Off Your Mortgage.So you probably already realize that in many cases, paying the minimum on your mortgage and investing your excess money is a better choice.īut why is that? What factors should you consider? And are there any reasons to pay off your mortgage instead? The difference between paying 4% interest and earning a 10% return is enormous, especially compounded over decades. There’s a good chance your mortgage rate is considerably lower than that figure. The S&P 500 has produced an average return of 10.7% since moving to the 500-company format in 1957. They’ve climbed a smidge recently, but they’re still near all-time historic lows. ![]() But mortgage rates have been extremely low for years now.Īccording to Freddie Mac, the average American mortgage rate hovers between 3 and 4% interest. In a vacuum, it feels better when we don’t owe anyone money. ![]() If you’re among the 85 million American individuals or families who own a home, you may ask yourself this question. Should you pay down your mortgage beyond the minimum or invest instead? ![]()
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