Jun 28, 2021
Have you been pondering the age-old question: should I pay off my mortgage or invest the money? A long-term client of mine recently broached this topic with me and today I want to share the process we used to help him make his decision. Listen to this client story to learn what you should consider when choosing between investing your money or paying off debt.
You will want to hear this episode if you are interested in...
- Paying off your house or investing? [2:22]
- The financial ramifications of paying off the house [5:03]
My client’s story
My client is 57 years old and part-owner of a successful business. He has been my client for several years. Not too long ago he emailed me and asked whether he should spend the next 5 years paying off his house or whether he should invest that money instead. This is a common question, but unfortunately, there is no right answer.
Recently, he refinanced his home and now owes $140,000 on his house at a 2.5% interest rate. With interest rates at all-time lows, there isn’t as much of an incentive to pay off the house as there once was.
Consider your goals
Most people only consider the financial aspects of their decisions. The numbers are pretty clear; a person will most likely earn more money investing their assets than they would by paying off their low-interest loan.
However, it is important to look beyond the numbers. The best way to tackle the question at hand is to consider your goals. Your overall goals are more important than this question, or any one question, and your answer lies in what your financial objectives are.
Consider the difference in outcomes between paying off your house and investing. Paying off the house will help you achieve a newfound freedom. On the other hand, investing will help you build wealth. Which outcome aligns more with your ultimate goals?
My client’s decision
After careful consideration, my client realized that he was more interested in the freedom that owning his home free and clear would bring. He knew that within the next 5 years that he would sell off his share of the company and begin a path to semi-retirement. Paying off his house made the most sense to him based on those goals.
Check out my website for extra resources
Do you need help making this decision? If so, feel free to reach out. You can do that by clicking the Start Here button at GabeNelsonFinancial.com. This will begin the process of evaluating whether we would be a good fit for each other.
While you are over at my website make sure to click on the Resources tab. That’s where you can subscribe to the newsletter so that you can gain access to worksheets and templates that will help you manage your finances so that you can better your life and achieve financial freedom.
Connect With Gabe Nelson
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