By Jhon Doe 18th Oct 2016
The best way to look at it is to look at your advance mortgage payments as an investment with a certain rate of return – a rate equal to the interest level on your mortgage. So, if you have a mortgage at 5.75%, an advance payment on that mortgage is basically an investment of that money at a 5.75% annual return. Most importantly, though, one should look at these returns as being after taxes
To recapitulate, the higher your mortgage interest rate is, the better it is to pay in advance instead of investing it. Where’s the cutoff line? It depends on a lot of things, but the big one is your risk tolerance – if you’re fine with a possibility and prospect for a down market in exchange for a very good chance of being able to pay things off earlier. Prepaying on your mortgage is very steady and reliable, but investing gives you the anticipation to hit a real home run and become debt free earlier than you thought possible..