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?