I have been reading a number of Personal Finance blogs lately and I have seen at least two posts that explains why some are not in a hurry to pay-off their mortgages.

Before we purchased a house 3 years ago, I did some research on mortgage interests, how to amortization period would affect the total interest we will be paying, how accelerated bi-weekly payments will reduce the interest as well as maximizing the annual pre-payments I will be allowed to make.

Having known all that, we purchased a house and poured most of our savings to the down payment. My options before is (1) only put down 20% down payment to avoid additional insurance and invest the rest of our savings (2) maximize the down payment and pay off the mortgage as soon as possible,

We chose option 2 and I am now trying to crunch the numbers and see how much our money could have earned if we went for option 1. Our mortgage is currently at 2.1%. Our mutual funds are earning 7-8% annually. I did some quick math and if we had chosen option 1 (assuming of course that both the mortgage and investment rates stay the same), we would have been at least $200K richer after 20 years. But then again, I still have to revisit my math and see if I have considered every thing.

This is the same reason why some people are not in a hurry to pay-off their mortgages. They are putting their money on high earning investments (with interest higher that the mortgage interest rate).

My mortgage is up for renewal in 1 year. I may have to make some adjustments and see how redirecting more of our money towards investment would benefit us more.

What did you end up doing?

 

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