COVER STORY
OVERVIEW DARREN SNYDERPAY OFF
YOUR MORTGAGE
OR INVEST?
I
t’s an age-old question and the answer
can make a significant difference to your
money situation over the longer term.
Paying off your mortgage is a notable goal
and achievement. Making the most of low
interest rates and paying off your home loan early
is commendable and will give you great peace of
mind. However, will you benefit once you come out
the other side of the mortgage and have surplus
cash to invest?
Or do you pay off the mortgage for a little longer
and consider building wealth alongside the loan? At
the very least, this second option is a diversification
strategy – having your money grow by investing in
other assets, potentially compounding with interest
over several years. And as the mortgage is paid, an
investment pot develops.
But putting someone else in charge of growing
your money is not as easy as it sounds. Several
recent studies reaffirm what we already know:
Australians are emotionally attached to their
money and moving it into an investment vehicle
is a difficult decision.
However, what these same studies tells us is
that there’s a case for homeowners to be puttingmoney towards their home loan as well as
additional investments.
In its latest Household Financial Comfort
Report, ME Bank says more households are saving.
It estimates savers, on average, are now putting
away close to $862 a month or more than $10,000 a
year, an increase of 7% from the previous biannual
report in 2018. Almost half of households with a
mortgage (49%) continue to pay above the
minimum in repayments, the report also says.
As at December 31, 2018, 47% of households are
contributing more than 30% of their income
towards housing each month, and this is a nine-
point fall from 56% over the previous six months.
What it suggests is that there’s some wiggle
room for Australians to make additional
contributions to superannuation, invest in the
sharemarket or work towards buying another
property. Money has looked at these options
and asked three experts to detail their views
on the perennial wealth management question:
“Do I pay off the mortgage or invest?”
It’s a close call, and it reinforces why having a
long-term financial plan is critical to improving
your future wealth.This recurring
household
debate is always
a close call and
there are several
options to
consider