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Should I Pay Off My House Mortgage?

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To Pay Off Your Home Mortgage Or Not?

When looking at whether to pay off different credit or mortgage debts, it can be hard to tell which one to go with and what to pay first.  Dave Ramsey has his debt snowball, Suze Orman has yet another strategy, and if you were to search on Google there would be many different gurus explaining what you should pay off and when.  It can be very confusing.  My argument in this post will be that you should NOT be paying off your mortgage debt in most cases, especially if you have recently purchased a property.  

Am I Qualified For A Home Loan?

Why Would I Not Pay Off My Home Mortgage?

As a very basic example, imagine that you were able to take out a mortgage for $200,000 at a rate of 3.5%, and you have a credit card with the same balance and a rate of 15%.  If you were to pay off the credit cards first, it would make more sense because the amount of interest you are paying, due to paying down the credit cards at the higher interest rates would outweigh paying the lower interest rate of the mortgage.  However, in all reality, who really has $200,000 in consumer debt and a similar mortgage debt as well.  

Am I Qualified For A Home Loan?

Mortgage versus the Stock Market

A much more likely example would be that if you were able to pay off your home mortgage at 3.5% interest or you were able to take that same money and invest it in the stock market.  The stock market has historically around a 10% average return which means that if you were to take your money and invest it into the stock market we could assume your average return over time would be 10% which is a pretty good return.  Next, if we were able to pay off the mortgage instead of investing that money in the market, then we would save the 3.5% a year we would pay in interest.  So, in essence, our return would be around 3.5%.  

Serious About Buying A Home: Get Pre-Qualified

Mortgage and the Stock Market

Lets assume now that we take our original cash and invest that in the market, earning around 10% annually, then we take those returns and start paying down our mortgage of 3.5%.  This now means that we would have an approximate aggregated return of 6.5%.  

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Synergy Real Estate & Property Management
Sunny Advani
Personal Lic # 01869864
Office Lic # 02012941

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About The Author
Sanjeev Advani

• Hundreds of Investment Real Estate transactions successfully closed • 350+ Units currently under Property Management • 3+ Years of Construction Management Experience • Certified Property Manager, CCIM (In Progress) • Bachelors in Finance • Bakersfield, CA Native Deep Dive: I have been licensed in real estate for almost 10 years, and I have been specializing in investment and commercial real estate for the past 6 years. Through the years I have worked with Real Estate Developers, Investors, Average Joes, and many more. I am a Bakersfield native, and my educational background is in Finance. I have just completed the CPM (Certified Property Manager) certification which is one of the most prestigious designations in the Property Management Industry, with less than 1800 members world wide. I am also the President of the Board for Habitat for Humanity Golden Empire, the Vice President of the Board for Income Property Association of Kern County (IPAK), and Vice Chair of the Commercial Investment committee at the Board of Realtors. I look forward to working with you towards your real estate investment goals. Sunny Advani California Agent Lic# 01869863 | California Broker Lic# 02012941 Email: Sunny@RE-Synergy.com | Phone: +1 661 235 5726