Paying Off the Mortgage and Financial Independence

The question whether to pay off the mortgage or to invest is one of the most highly debated issues in personal finance. I can see how just looking at it financially, investing might make more sense, but personal finance is also personal. Personally we prefer to focus on paying down the mortgage first. I just really like the idea of owning our house free and clear. I also like the fact that if we don’t have a mortgage payment we need a lot less income, giving us more options. Also the interest only mortgage will have to be paid off after the 30-year term, and the ultimate nightmare would be that the stock market tanks at that time and we wouldn’t qualify for a new mortgage and we would be forced to sell our house.

The plan is to pay off the mortgage in the next 7-10 years and then start investing more aggressively. Right now we do some investing: we invest €100 a month in a stock index fund through Meesman and I also invest 5% of my take home pay. I’m aiming for a 75% stock and 25% bond fund mix. Of course, by only investing this much we’re not making a lot of progress towards financial independence. Using the 4% rule we currently are only 1,42% of the way there to be able to live of our investments. As I said, we will focus more on this once the mortgage is paid off and then without a house payment, we should be able to invest about 10 times what we do currently and our progress will be a lot quicker.

So what do you think? Pay off the mortgage early or invest?


2 thoughts on “Paying Off the Mortgage and Financial Independence

  1. We’d prefer a combination, first pay down your mortgage to a 60-70% LTV and invest the rest. The linear and savings mortgage will take care of itself anyway so the interest only mortgage would be preferred, however it depends also on the interest levels for the different parts. It might be worth it to do ‘looptijdverkorting’ and ‘bijstorten’ for you savings-thing.

    Any plans for kids in the future? That’s a situation where lower monthly payments are very welcome so you can work a bit less.

    Nice blog and nice writing style by the way.

    Liked by 1 person

    1. Thanks! I’ve been reading your blog for a while now too. Glad to see you are posting more regularly lately.

      We would like to have kids in the not too distant future, so your point about lower monthly payments was important for us. That’s why we focused on the linear mortgage first because that had the most impact on our monthly payment. Next year we’ll start paying more on the interest only mortgage because that one will not pay off itself.


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