John wants Dave’s advice on whether he should focus on paying his mortgage down or invest more.
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When it comes to managing your finances, there are a variety of options for where to put your hard-earned money. Should you focus on paying down your mortgage or invest in other ways? While investing can certainly have its benefits, there are many advantages to focusing on paying down your mortgage.
One of the main reasons to prioritize paying down your mortgage is the guaranteed return on your investment. By putting extra money towards your mortgage, you are effectively earning a return in the form of interest savings. This is a guaranteed return, whereas investing in the stock market or other options comes with more risk and uncertainty. Additionally, by paying down your mortgage, you are reducing the amount of interest you will pay over the life of the loan, potentially saving you thousands of dollars in the long run.
Another benefit of focusing on paying down your mortgage is the peace of mind that comes with owning your home outright. When you don’t have a mortgage payment, you have more financial freedom and security. You won’t have to worry about losing your home if you run into financial difficulties, and you will have more disposable income to use for other expenses or investing in the future.
Paying down your mortgage can also help improve your credit score and financial stability. By reducing your debt-to-income ratio and showing a history of making on-time payments, you can improve your creditworthiness and potentially qualify for better interest rates on future loans. This can save you even more money in the long run and help you build a solid financial foundation.
In addition, paying down your mortgage can provide a sense of accomplishment and satisfaction. There is a great feeling of pride that comes with knowing that you own your home free and clear. It can also provide a sense of security and stability for you and your family, knowing that you have a place to call your own without the burden of a large monthly mortgage payment.
Of course, it’s important to find the right balance between paying down your mortgage and investing for the future. It’s a good idea to have an emergency fund and contribute to retirement accounts while also making extra mortgage payments. However, if you have extra cash to spare, prioritizing paying down your mortgage can be a smart financial move.
In conclusion, focusing on paying down your mortgage can have a variety of financial and personal benefits. While investing can certainly be a valuable tool for building wealth, the guaranteed return and peace of mind that comes with owning your home outright make paying down your mortgage a compelling option. By reducing your debt, improving your financial stability, and ultimately owning your home free and clear, you can set yourself up for a more secure and comfortable financial future.
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Sound advice. But if the mortgage interest rate is less than expected investment returns – adjusting both for tax-treatmemt – I'd be tempted to keep the mortgage running, knowing I could pay it off whenever I wanted to.
Basically it’s behavioral – people don’t actually invest the money that could go toward the mortgage.
I don’t care how low your mortgage rate is…pay it off ASAP! You’ll be so happy you did.
I watch several YouTube videos on how to trade in the stock market but haven't made any head start because they are either talking some gibberish or sharing their story of how they made it and I do not want to make mistakes by taking risks in my own hands
I got really frustrated living in a very expensive city. Housing prices went up by 35% this year. Mortgage rate 7%+ I can do a 35% down payment on a home, but I am thinking about moving to a city an hour away. Its around 40% cheaper there. I want a place to live that is paid off asap.
People, a few words of advice from a successful investor: come to Dave Ramsey for the human interest and the entertainment, perhaps even some personal finance advice.
But that's it. DO NOT take his investment advice, especially his mutual fund plugs. Trust me: you'll remain poor!
I dumped $70K on my mortgage but now the economy has tanked and I'm struggling to rationalize using cash earning guaranteed 6% to payoff the rest of a mortgage at 2.6% rate? Its a ranch on 40 acres with balance of $178K and valuation of $750K.
Why not let the 2.6% money ride while receiving 6%? Or am I missing something here?
Thank you Dave, you just convinced me to pay my house off TODAY!
In his study, people typically paid off the house around age 50. Paying off the home "early" doesn't necessarily mean as soon as possible.
I wonder why part of the equation might not be the following: How much equity is in the house now? Do you have enough equity to buy a smaller/cheaper place free and clear, then you don't need to burn the savings. Invest the savings in something that can generate a revenue stream that will put you back in the house you prefer.
Banks are selling mortgages. People always say it's a good option to buy at discount, but with the market turmoil and everything at stake in present economy, I'm thinking of buying stable coin to hedge against inflation, or is it all right saving over 350k ?
I think this spiel is the best I've heard him give as to why you'd pay off your house even if the loan interest rate is low versus invest the money.
Thanks for breaking it down
Investing over paying off the mortgage. Over time you will compound those gains that will LIKELY return you much more than a home that won’t go up as much over time
A home will truly never be “yours”. The tax man can take it away at anytime if you don’t pay real estate taxes.
The math favors investing the money, but the psychology favors paying off the house. I’m usually a numbers guy, but I’d go with the psychology on this one.
I paid off my house 4 years ago, am 60 didn't had a good paying job until 8 years ago, I have saved 100k in IRA retirement in 6 years, I wish I started earlier, but all of my jobs were almost minimum wage, I got this job by the grace of God and looking forward to retire at 65……. And no children to take care of.
I almost think max out 401k before mortgage?
This guy calling just to brag. bastard. I'm surprised what I've managed to accomplish with only making 65k a year. If I was making 140, I'd have so much more in retirement. I'll be making that in 5 years. Counting down the days ;D
This is different today with higher saving interests if you have a low 2-3%
I’m struggling with this response because I have a 2.25% mortgage and owe $220K and the house is worth $770K. Thoughts?
College is mostly a scam. Figure out a way to have an employer pay for it.
Even if you can't completely pay it off, thrown $75k at it with knock off about $350/month in interest, so $350 more per month is going to actually pay down the mortgage with each payment.
None of the millionaires in the case study saw 2.5-3.5% mortgages.
This helped me 4 yrs after it was posted..ty
Great advice from Dave. As long as you owe one dollar on your mortgage, the property is not yours. We appear headed into troubling economic times that might make 2008 look like a booming year. People these days don’t know what it looks and feels like to see income and wealth disappear – when scraping up $500 is nearly impossible.
More content from people on average incomes please.
This guy doesnt have financial issues… he just has some idealistic decisions to make.