Skip to site content
The Show

Should You Prepay Your Mortgage and Mutual Fund Opportunities

Have you ever wondered if you should prepay your mortgage?

In today’s show I give you the information to make an informed decision based upon your personal situation.

We take into account the analytical side of the decision as well as the emotional relief that can come from being DEBT FREE….

The analytical side of the discussion comes from a great article in this month’s Consumer Reports titled “Your Mortgage: It Rarely Pays to Prepay“. As you can probably see from the title of the article, they argue that that most people should not prepay and should instead use the money to invest. I think that Consumer Reports did a great analysis, but remember paying off your house versus investing in the stock market has many different factors beyond a simple math calculation. Depending on your personal risk threshold there are people that would prefer to be debt-free for the psychological satisfaction rather than maximize the earning potential of their investment portfolio. In today’s show I give you my insight to help you determine where you fall in this decision.

A few key facts from the Consumer Reports article…

  • When comparing paying $100 extra each month towards your mortgage balance or investing in a S&P 500 Index Fund Consumer Reports provided the following results:
  • After 10 years the S&P 500 investment on average produced a gain of $10,058 vs. $4,051 from the added mortgage payment
  • In about a 1/3 of the 10 year periods analyzed, paying down the mortgage produced a better return. However, the difference was pretty meager ranging from $1 to $2,799 of an advantage for prepaying your mortgage.
  • When the S&P 500 investment beat the prepayment, it did so by $70 to $16,763
  • It should be noted that when you extended the analysis out to a 15 and 20 year period of home ownership, the S&P 500 investment had the advantage 100% of the time. The average dollar gains from the stock investment grew from $10,058 in the 10 year analysis to $19,613 in the 15 year and $41,931 in the 20 year analysis.

Please note that this was primarily a mathematical calculation and there is much more that should go into your decision of prepaying your mortgage. You should also take into account:

  • Your risk profile
  • Your tax situation (if you make enough money that the Mortgage Interest Deduction is reduced or eliminated by AMT tax then you have more to consider)
  • How close you are to retirement
  • Upcoming cash needs (investments are much more liquid then real estate)
  • Peace of Mind factor…

**Fund Managers are using this time of volatility to welcome new investors**

I also wanted to let you know that with all of the volatility in the financial markets there are some very well know Mutual Funds that have been closed to new investors for a number of years that have reopened to new investors. Below I have provided links, so that you can research each of these options:

Thanks and see you next week!

Enjoy the Show?

Where You Can Watch and Listen:

Subscribe on these platforms or wherever you listen to podcasts for new episodes every Friday, live streams every Tuesday at 10am CT, and new highlight clips throughout the week.

Related Content

Free Resources

Home Buying Checklist

Answer these questions BEFORE you consider buying a home.

View Resource

Refinance Guide

Learn everything you need to know to do it right. This guide breaks down how refinancing works, when it’s a…

View Resource

Financial Order of Operations®: Maximize Your Army of Dollar Bills!

Here are the 9 steps you’ve been waiting for Building wealth is simple when you know what to do and…

View Resource

Articles

Buying a House – Money Guy’s Ultimate Guide To Your Biggest Purchase

, , , , , , ,

Read More

Exclusive Sneak Peek of Millionaire Mission by Brian Preston

, ,

Read More

What Should I Count Towards My 25% Investing Rate?

, ,

Read More

Financial FAQs

Courses & Tools

How about more sense and more money?

Check for blindspots and shift into the financial fast-lane. Join a community of like minded Financial Mutants as we accelerate our wealth building process and have fun while doing it.

https://moneyguy.com/wp-content/uploads/2023/10/accent-icon-book.png

Millionaire Mission (Brian’s Book)

Buy Now
https://moneyguy.com/wp-content/uploads/2023/10/accent-icon-math.png

Know Your Number Course

Buy Now
https://moneyguy.com/wp-content/uploads/2023/10/accent-icon-pencil.png

The Money Guy Net Worth Tool

Buy Now

Recent Episodes

It's like finding some change in the couch cushions.

Watch or listen every week to learn and apply financial strategies to grow your wealth and live your best life.

maxresdefault 3

Is Retiring Early Really Worth It?

Watch Now
maxresdefault 1

Why Everything You Know About the Rich Is WRONG!

Watch Now

Is It Ever Okay to Break the 20/3/8 Car Buying Rule?

Watch Now