Should You Pay Off Your Mortgage Or Invest?

[@MeaningfulMoney]

🔴 Watch Next: Pay Off Your Mortgage Or Invest?, Part 2: kzbin.info/www/bejne/gYmYp5ymeJWLo9U

[@JohnSmith-vy4lh]

I would say it is best to pay off your mortgage as soon as you can, although all mortgages are not validly executed. Which makes them a nullity in law. Checkout Bank of Scotland v Waugh and others 2014. BOS conceded and discharged 2.5 million of mortgages owned by the Waughs.

[@pollythedog4914]

The numbers used are tax free in the UK....but not in many other countries. So anyone watching this needs to consider the tax breaks on mortgage interest in their country and also whether the investment return is taxable. Also by investing rather than paying off your mortgage you are effectively creating a self made endowment mortgage for a portion of your debt.

[@johnhuxtable4493]

Doesn't address that overpaying your mortgage is a form of insurance against upward fluctuation in interest rates. Rate hikes or other circumstances may mean your 250 pound is no longer enough to cover your expenses and pay your mortgage at all. The impact of defaulting on a loan is greater than making a few extra bucks in the stock market for most ppl. Imo its better to get a bit ahead of your mortgage to give you some wiggle room before investing.

[@muthafuhcka]

Invest of course, there’s no commissions to be had if you just pay off your home.

[@AnnaOllsson]

I’ve been diligently working, saving and contributing towards financial freedom and paying off my high interest mortgage, but the economy so far since the pandemic has eaten away most of my portfolio, what I want to know is this: Do I keep contributing to my portfolio in these unstable markets or do I look into alternative sectors.

[@JosephineKenney]

Just try to diversify your portfolio to other market sectors, that way your investment is balanced and you don’t get to make so much losses.

[@PennyBergeron-os4ch]

Yeah, financial advisors could make a lot of difference, particularly in a market such as this. Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are a lot of wealth transfer in this downtime if you know where to start. I have been using an FA since 2020, and I return at least $30k ROI, and this does not include capital gain.

[@HildaBennet]

Could you tell me how to contact this specific coach using their service? You seem to have the solution, as opposed to the rest of us.

[@PennyBergeron-os4ch]

For me, Sonya Lee Mitchell turned out to be both better and smarter than all the advisors I ever worked with till date, I’ve never met anyone with as much conviction.

[@HildaBennet]

I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.

[@jackcro8825]

I paid my mortgage off early, because peace of mind counts a lot. I felt pay off the mortgage because no one knows what my happen later in life.

[@Essien-ij]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

[@Deborah-r6x]

Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks

[@Essien-ij]

@@Deborah-r6x However, if you do not have access to a professional like Clementina Abate Russo, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments

[@Deborah-r6x]

@@Essien-ij Oh please I’d love that. Thanks!

[@Essien-ij]

@@Deborah-r6x Clementina Abate Russo is her name

[@Essien-ij]

Lookup with her name on the webpage.

[@KMartha22]

I do both. I think the security and freedom that comes with a paid of mortgage should not be underestimatesd.

[@symphonyfarm2009]

Not only that, returns on renting your property while you travel are a GPA win!

[@aab434]

Except the world we live in we’re always burdened with taxes. Especially if you have a high tax rate or high home price like here in the United States.

[@vermin1970]

If I buckled down and stopped all frivolous spending, I could pay my home off in a couple of years and still live comfortable while doing it. Its about time I start working on that.

[@westcoaststacker569]

I believe with the uncertainty and possible volatility of the future it is prudent to pay off the mortgage while also investing so that you are able to weather thru likely recessions etc.

[@Utubesuxmycock]

both? thats why youre broke and still have to work

[@Theoriginalramjammer]

“Looking out for my wife’s preferences had other compensations..” Amen brother😁

[@AlphaEngineer2022]

Ahh yes, the old glock glock 3000😂 Let’s hope she doesn’t want it paid off early to leave and take half😬😂

[@victorjay9586]

Exactly the reason we went on vacation instead of paying down the mortgage. People said we were crazy going during the early pandemic. But thinking back now, so glad we didn’t cancel

[@MMG_MoonManGuitar]

Amen indeed!

[@timshull59]

Happy wife happy life

[@Andy-zx4hl]

This guy gets it

[@RyanEmmett]

We overpaid on our mortgage to pay it off asap. We didn't want any debts hanging over us. Once the mortgage was paid off then we started saving and investing.

[@mattcameron9349]

I doubled my mortgage-payments, cancelled all other savings and investments (including pension contributions) and as a consequence made the final payment on my 45th birthday. I regret nothing!!

[@seanknox7321]

Oof.

[@adamw7340]

Congrats! :-)

[@spencerosei2616]

Congrats

[@markdillon5494]

Overpay mortgage every time for me. The financial freedom and emotional impact (of paying off the mortgage) it provides cannot be understated.

[@iainhusband445]

Brilliant video, having been in the position of having a six figure mortgage , two young kids and two redundancy notices (one given on Monday the other on Tuesday).. it is amazing how focussed you become in clearing your mortgage..When you do, believe me your boss never holds as much power over you as they once did...

[@guyr7351]

I totally agree ref the impact work and fear of losing your job with a good sized mortgage to cover. Made redundant 13 months ago, took 4 months to get a new job, had a large mortgage. New job 60% of previous salary but have reworked the mortgage and dropped rate and as such payment each month. I could potentially retire now but if I can work 4 more years then will deffo be OK, but now I know I could manage the finances in work or not I sleep very easily

[@Peter-zv4dx]

Iain- Your are a clever bloke. Truest word ever spoken

[@jacobraju4479]

This is truly refreshing to hear Iain! Fairplay to you and thank you for sharing!!

[@detroitbanger1]

One thing they also don't talk about is when interest rates rise, which they pretty much have no option to from here. Sure 2.5% interest currently isn't doing much, but when interest rates are hitting over 10% and the investment return rate and share price drops, watch people pull all the money they have invested out, and here in Aus paying all the taxes to do so. Then the return that they had is now halved or worse. People will end up struggling. I personally do both as I believe the old saying of all your eggs in one basket.

[@joaoafonsoa.pereiradasilva8923]

@@detroitbanger1 That's the thing, investing the spared funds leaves you with much more flexibility and capacity to go through financial hardship when compared to repaying your mortgage with all the free funds you have. Plus if you don't want to be exposed to rising rates, just get a fixe rate mortgage (or re work you're existing one to one). Therefore you'll be able to get predictability in your payments, plus inflation will eat up the value of that mortgage payment over years and you'll still be able to save your spare money on the side and use it to support yourself and your family in case things go wrong. If you repay always, you may finish mortgage sooner but until you do so you're much less protected to default than if you save for a rainy day (season)

[@justingross]

I paid off my mortgage on my house and rental property in about 5 years. I made the final payment in November 2019. The timing for the shock of the pandemic was sweet. I can now invest more into other investments. I view debt as risk. Eliminate debt, minimize risk. It’s a great recipe for sleeping well at night. Zero regrets.

[@johnporcella2375]

Eliminating debt increases risk, surely? It means that you do not benefit from general inflation eroding the value of the debt over time and nor having as much spare cash to fund many more property investments.

[@WhiteBoardFinance]

The golden middle. Do both.

[@aqz2000]

Good to see you here Marko. You are one of the few I follow on KZbin.

[@russelcurtis1647]

Cant decide? 50/50. Invest half, pay down your mortgage with the other. Financial choices are usually not limited to either direction.

[@snubbii9276]

Exactly mundo

[@cristiangirbea]

I just found your video and the fact that you've added Emotional as a Factor, makes me an instant subscriber. I've been watching financial videos for the past 2 years but yours is the only one I feel that is complete. Amazing job!

[@MeaningfulMoney]

Very kind, Cristian. Money cannot (and should not) be separated from its emotional/psychological impact on us, in my view. Great to have you with us!

[@johntatman9168]

I think age should play are part in this as well. If you're nearing retirement you don't want to be in the position of having to pay a mortgage from your retirement income. Pay off your mortgage from working income and don't plan to retire until that's accomplished. So if you're 50 yrs old or older add the additional money to the mortgage. If you're younger, invest.

[@MuzixMaker]

That depends on how much and how safe your retirement income is.

[@Rachjkent]

I’m 57 but my retirement income at 67 suggests that it is not enough currently to just pay off the mortgage. Only paying 2.26% interest on the mortgage. So it makes absolute sense for me to invest any extra in index trackers for a higher return in order to create enough to live on from 67.

[@johntatman9168]

@@Rachjkent I understand what you're saying but if/when the market crashes then you still have the mortgage and not enough money to retire on. If the mortgage is paid off nothing the market does will affect it unless of course you want to refinance to pull money out which I don't believe is a good idea.

[@venkataramanareddyta]

I of course come from a different country. Interest rates for home loans are about 6-8%. I pay about 8.3 % for my mortgage. If I had let the mortgage run the course, I would have paid quite literally twice the amount I borrowed. Now the good thing in India is equity returns is about 12-14% giving you a solid 3-4% gain over paying the loan. However, I decided to pay off the mortgage for the simple reason that: 1) When you own debt, the debt owns you in some sense. All decisions I make regarding my job, my future etc will depend on my monthly mortgage payments 2) As a person I am generally not hopeful of the future. So when I am not sure of my job prospects, it makes no sense to believe that my future income stream will match my future obligations I feel I have made the right decision (though only time would tell). In short the only advice I would ever give anyone is, never own debt for too long. It will impact your independence

[@christopherfaulkner5758]

This video is why I turn to your channel first. Balanced, not dogmatic, clearly delivered, easy to follow.

[@MeaningfulMoney]

Thank you - I appreciate it 🙏🏻

[@imdomtrotta]

Finally someone that speak with sense, every situation is different, also people can always split the £250 and invest a portion

[@johnporcella2375]

They could, but why?

[@todd1547]

In the US, the tax math has changed quite a bit in recent years. Before, mortgage interest was the most common reason people were able to itemize their taxes which generated significant tax savings for a lot of people. Now that the standard deduction has been doubled, many people are not itemizing anyway.

[@cheesex8189]

Having worked in investment banking for a long period you are absolutely right on this, all of us in our team preferentially paid off debts, notably mortgages, but rather than the phrase "guaranteed return" we used the phrase "risk free", you have a known effective return on your money. Paying off debt is also completely tax free of course.

[@Darvineb86]

What about rental properties. Would it make sense to make that extra payment if it has a positive cash flow ?

[@omarbryant7930]

@@Darvineb86 I want to know this too

[@Peter-zv4dx]

@@Darvineb86 take the extra cashflow and pay your debt that you cant claim in tax / mortgage etc.

[@riboid]

@@Darvineb86 I am paying off and have paid off the full mortgage on my rentals and when I retire or cannot be bothered with the grief anymore, I will sell them. I effectively use them as a savings plan as I don't need the rental for income as I am still working.

[@kombe971]

@@riboid thing is tho most people get attached to their homes and don't sell once paid off

[@DoctorDon]

I was one of those people who overpaid my mortgage in order to reduce the duration of the loan. I did find that there was one other factor that didn't occur to me early on, but which felt relevant to me during economic downturns. The equity that you build in your house tends to be illiquid. When times are good it seems like it'd be fine, that if you need a bit of liquidity, you can take out a home equity loan (at least here in the States). But when credit becomes tight, when you're likely to actually need liquidity, you may find that you can no longer get a home equity loan (or refinance). Equity in your home is not liquid if you can't actually tap it when needed. It was nothing that ever happened to me, but it was a subtle aspect of the question that I don't remember anyone ever mentioning.

[@josephmonk9041]

Another advantage to investing it (assuming it is an investment you can access at any time) is that in a worst case scenario (loss of income) you can access that money to buy yourself time (keep paying the mortgage) instead of defaulting. Paying extra doesn't remove the requirement to pay again next month.

[@nicola6234]

We have a redraw facility on our home loan so we could actually pull it back out, and it does count towards future repayments.

[@richards5110]

It's removes, in his example, 4+ years of required payments (over 20% time reduction)

[@josephmonk9041]

@@richards5110 which doesn't do you any good if you lose your job 10 years in to the 20 loan. You can also use those invest money (plus gains) to post off the remaining balance once you have enough.

[@richards5110]

@@josephmonk9041 it does if you lose it 16 years in? And if you don't have enough liquid investments you will still be out.

[@stevenhaas9622]

But a house is also just an investment. The more you pay down the mortgage the more net equity you build. In a break the glass scenario you can always sell the house and cash in your equity just as you could sell off other investments. It's not like that money goes into the toilet

[@andrewmitchell2072]

Just found your channel. Very happy. 39 years old. Finding this channel I can now map out the next 20 years to retirement. Thanks

[@MeaningfulMoney]

Great to have you with us, Andrew. 39 is very definitely NOT too late. 👍🏻

[@Showmetheevidence-]

There’s a certain comfort owning the place you live in. Yes the calcs are easy… so pure “investing” = if you get better returns than your mortgage interest rate then, rather invest. But that “home security” really helps & isn’t just about the %s

[@joshzarkin564]

I personally invest. The appeal of borrowing “cheap” money is to make a profit on the spread between your investment returns and your mortgage rate. Always have to view it as a 30 year bet and can’t act emotionally with short term market movements. Mortgage interest paid is also a tax deduction so reducing that at some point will have an effect on your tax returns. Lastly, as others have pointed out if forbid I get into some financial emergency, I can easily withdraw my investments to come up with cash. If you pay off your mortgage early that money is gone and you can’t access it ever again.

[@janewhitzend688]

Excellent points and well put. My husbeast is keen to pay off the mortgage because it feels mentally better for him. I like investing and am in charge of the budgeting, so we split any extra cash between the 2 and salary sacrifice extra towards his pension. Our goal is to get him in a position to retire at 55 then downsize. We came late to financial planning but in the last 5 years have made great progress. Channels like yours, and James Shack have really helped me understand our choices and our pensions so much better. The key for us is to frequently review our options and needs, then be flexible in our approach. Its fabulous there are more uk based people like yourself giving us this info now. The tinternet can be a great place. X

[@shyamfootprints972]

"My husbeast is keen to pay off the mortgage".......Husbeast! Really!

[@janewhitzend688]

Yup it’s a term of endearment which he enjoys, being a big hairy chap who has no spatial awareness 😂

[@MeaningfulMoney]

Love this, Jane - made me laugh!

[@calanhorsman6817]

Your channel should be compulsory viewing in the UK. Honestly, so many people don't understand the true differences between various financial instruments including the most basic share ISA's vs pensions, etc. You articulate this better than anything else I've seen, and your reasoning for paying down the mortgage is spot on. Most people I speak to don't even know about Share ISA's, or investing in ETF's, which is a crying shame, especially considering a cash ISA is entirely pointless.

[@MeaningfulMoney]

Thanks Calan- appreciate the kind words! 🙏🏻👍🏻

[@jarrac]

Balanced risk is the most important route to be taken by all and overpaying a mortgage is not wrong especially when considering rainy days like a pandemic (not everyone was entitled to furlough money). When considering investments, I believe we should only risk what we can afford to lose. Debt free is an easy life

[@kristiantoade8104]

kinda helping open my eyes as a young adult to finance my upcoming mortage more. Love the video

[@Peter-zv4dx]

What comes with paying off your mortgage for some ppl, peace, confidence, security. It’s something far more important than investing and making money.

[@Sweetie8387]

I agree

[@Peter-zv4dx]

@@Sweetie8387 your boss will never have as much power over u as he once did after you pay off ya mortgage!!

[@Gas_man]

If you’re disciplined and you have a good interest rate on your mortgage, I prefer to invest. I have automatic deposits set up into my investment account and add money to that monthly amount when I get a raise or otherwise end up with extra money per month. I also am constantly reminding myself to not worry about daily fluctuations in the market. I’m fairly confident I’ll come out ahead in 27 years when my mortgage is paid.

[@actiondefence]

I'm on the side of pay off mortgage. I do not want to take risks with money that I either can't afford to lose our that I depend on.

[@union310]

Agreed to a point, i pay more but also save

[@alexandra109]

So glad you talked about this. This is the first video of yours that I’ve seen and compared to other videos on finances that I’ve watched it’s refreshing to see someone speak from a realistic POV. Emotions do come into play.

[@roblowry9457]

I actually paid my mortgage off yesterday, so this is very fitting. Like you, Pete, my wife (who is also called Jo - what are the odds?) wanted the mortgage paid off, so we overpaid every month. However, we do both - I also invest monthly into a SIPP and a S&S ISA. I feel very FU as JL Collins would say; should I need to I can now shut the door, lock it and lead a life of freedom

[@rogerandout808]

Well done! Must be a great feeling!

[@MeaningfulMoney]

Massive congrats, Rob - whoop!

[@tancreddehauteville764]

No freedom - you still have to pay council tax, gas, water and electricity bills, etc. You'll do that until the day you die.

[@apeekintime]

Short answer, and the only answer a finance advisor should ever give, IT DEPENDS. The correct answer will depend on the needs, and goals of each individual. There are pros and cons to each financial decision that should be paired against your objective.

[@williambingaman2787]

Great thoughts. I typically lean toward doing both. If I had $250 extra, I would split it right down the middle and pay $125 extra toward my mortgage and invest the other $125 into stocks/bonds/mutual funds.

[@MeaningfulMoney]

Great strategy, William

[@brycewalburn3926]

I truly appreciate the nuance you gave this question, especially in contrast to Dave Ramsey. His argument for paying off your mortgage early is purely emotional, and I've never seen him acknowledge that.

[@MeaningfulMoney]

Thanks Bryce - appreciate the feedback!

[@philipslattery6952]

I always find interest in listening to this debate. To me the maths may or may not make sense but emotion/risk will have a lot to do with it. My biggest concern is keeping the house if something goes wrong. If i am front loading the mortgage you are getting closer to the day you own the house and it cant be taken from you. If chosing investing over the mortgage if you get to a recession and loss your job it is likely that markets will fall as well. You may end up in a situation that the investing wont cover your remaining mortgage. As said in the video over paying the mortgage is a guarantee which with the market you are always worry about fluctuations.

[@rslr]

100% agree. That's why I choose to pay down my mortgage a bit quicker, too - because at the end of the day, I'll always need a place to live. Something goes wrong? I still have shelter. I can't live in my portfolio - I know I can sell it (but the taxes are crushing if you have to liquidate).

[@joaoafonsoa.pereiradasilva8923]

@@rslr That wasn't a fair comparison. If you're selling on a rainy day then it means your taxes are also much lower because capital gains are lower or null. Plus these comparisons also fail to account for the opportunity cost of the increased in valuation of the property which goes up much higher if you're leveraged.

[@MuzixMaker]

There’s much to be said for being able to sleep at night. Depends on your other assets and earning capacity, how old you are and how many years remain on the mortgage.

[@marionexley607]

EMOTION yesssss. You are the ONLY English financial advisor that I have found that teaches the same way as Dave Ramsey in the USA who has helped me get completely out of debt and pay off my house with his proven method. You cannot put a price on the PEACE that you feel when you owe nothing to noone. No one can ever take my house from me if I lose my job or if I get ill. EMOTION, at laaaast someone else teaching it, thank you so much.

[@needmoretimeplease291]

Thanks for another great video Pete. This one was especially close to home because I did something similar. Over the course of 20+ years, whenever my emergency cash slush fund reached a certain point, I’d pay off a small lump of the mortgage to reduce the monthly payments (rather than shorten the term) and with the mortgage money saved, I increased my pension payments, therefore investing. Because I was paying off the interest only part of my original mortgage (endowment…) with my lump payments, when the endowments did mature having more or less come back from their big dip, I was able to clear both the interest only and repayments parts of the mortgage by the time I was 50. Spot on about the emotion too…. The euphoria felt walking out of the building society having cleared the mortgage was priceless and when COVID hit, the one thing we didn’t have to worry about was the house.

[@MeaningfulMoney]

So great to read this - thanks for sharing!

[@actioncoachderby6860]

Xx 5:44

[@williamwilson6499]

I recently got a mortgage…paid one scheduled payment and then paid off the balance before the second. Hate being in debt.

[@cato451]

Yup. This is the dilemma I struggled with for years. I found a balance between the two. I lowered my fixed mortgage rate and balance to a very manageable level for a shorter period. I have invested the money I otherwise would have paid off the mortgage into tax free municipal bonds. The offset covers the interest rate. Now that neutral cost money sits there ready to pay the mortgage but ALSO act as an emergency fund if I need it. Two birds, one stone.

[@johnporcella2375]

Municipal bonds? What are they?

[@ruanrichter]

I found the little smirk with "other compensations" far too funny. Great video :)

[@bbarnes4852]

One point missing from this is that after you’ve paid the mortgage off early, if you saved the extra 4 yr 8 months payments you would have paid, you would have £73,360 in the bank at the date your mortgage would have finished!!! ((£1060+£250) x 56months)

[@michaelwink7552]

Was literally about to comment the same thing and

[@flower-ss2jt]

In the last century I had a friend from the East End who was really good with money, unlike me. His advice was 'Put all your outgoings in one column, your income in another - and if your income is bigger than the outgoings - then take on the debt'. With property/investment this is straitforward, but cars are a loss, so I still have an old well maintained car because a new car does not make me money. Emotion is one to think about as I do spend money on 'enjoyment' especially with family - the reward is the happiness it brings.

[@Ricky16317]

I really like this approach. Very few people are so focused on the numbers that they can completely shut out the emotional side. Also, my brother works for a large financial services company and has noticed that about 90% of active traders end up losing money in the long term, but even with passive traders (those who rely on managed portfolios or index funds) are still at the mercy of the markets and stand to take a substantial hit almost on a whim if the market dives. Once the money is in my house it's as close as it gets to being guaranteed (because being realistic about it, there's always a chance the housing market will crash as well, but it's generally much more stable)

[@nolickspittle4753]

Other considerations are that people cash in investments for cars and holidays or to pay for weddings. But they so remortgage equity. Careful discipline required in whatever route you choose.

[@mnorma12]

Speaking from direct experience with each of these strategies at different stages of my life, there is nothing more liberating than paying off a mortgage. The word mortgage literally means "death pledge" and with good reason. Do what you want, but the 'maths' can't tell you everything. Of course, this choice becomes a complete no-brainer when interest rates finally return to 'normal.' We've become habituated to virtually free borrowing, but that won't last forever. Almost nobody will be happy when the rates get bumped, but it's going to happen eventually.

[@msgdeletdbymod4471]

thats why u get fixed rate

[@abrahamflores2566]

I agree with you but I personally prefer to have a mortgage forever. My reasoning is low interested rate but also you have to take into consideration what your loan to value is. If your house is worth 1 million dollars but you owe $200k you can survive even the most severe market crash. My mortgage is $900/month so it doesn't bother me or scare me

[@1987markp]

As a fellow advisor I REALLY appreciate the callout of getting rid of the "should" language. In Canada I hear it way too much and has inspired me to start creating my own content as well. Love your messaging!

[@davidroush1224]

Emotions aside, personal experience was that not having a mortgage yielded a much greater net worth than my peers. I believe the “investing extra money at higher rates” argument vs. paying off the mortgage is not just simple algebra, but more like calculus with rates of change effects due to compound interest as the primary driver.

[@davidroush1224]

All debt compounds against you. Often forgotten is the extra money paid out/lost to the bank or mortgage company. Even with tax refunds on interest paid, one might still pay out $100,000 USD or more than the original home price over a 30 year mortgage. That is money which if not paid out would have been invested and started compounding earlier FOR them - perhaps 10-15 years earlier. That can add up to hundreds of thousands of dollars over decades, accelerating as time goes on and compounding effects take over and dwarf the initial invested amounts.

[@annabellaandrewkingdon7972]

Also you could/should (?) Add in the complexity that a mortgage is really a geared investment in bricks and mortar. So you need to evaluate your attitude towards geared investment as well as the emotional and real attachment you have towards having a roof over your head. There is an argument that we should all have as big a mortgage as possible and always buy a larger and larger house as it is a tax efficient and geared investment, but again that's all tied up with risk and reward and how much you need/want a big house and how likely you are to downsize at the end.....

[@tor9273]

I never want to live on borrowed money. That means paying off my house and not having a loan for my cars or anything else as quickly as possible. It feels great once it’s accomplished and then you can pour money into investments and take your risks there.

[@chrise2329]

I've overpayed my mortgage, I'm happy with that decision and it's nearly all paid off. What I regret is not investing some of the money I've built up in cash ISAs over that period. This was down to lack of knowledge about what options existed. I read an article earlier this year about investing that made me realise it was something I could do. After spending some time researching I've converted some of the cash ISAs into S&S ISAs. Pleased with the performance of them so far especially with how inflation is at the moment!

[@gavgreen10]

Same as Chris. I've always focussed on reducing the mortgage and saving - often at measly low rates - but 'should' have balanced this out with some investing - S&S ISA's etc. I've been doing my research too - hence stumbling across this channel - and now intend balancing things out a bit. Better late than never. I should state I have had an interest only mortgage for some years - which suits me - so it is important to chip away at one of those as after 20 years, you might still have a big old debt around your neck.

[@Choppa_Ya]

Thank you for this information. I’ve been blessed enough to do both at 27 years young. Aggressively overpaying my mortgage and investing what I can after All obligations are met.

[@Delburr]

Love this explanation. I already invest enough otherwise and see paying off my mortgage early as a hedge against all that other uncertainty.

[@tancreddehauteville764]

It depends at what stage in your life you're at. When you are young you should focus on saving for your pension instead of paying off the mortgage, given that the sooner you invest the more you will gain over time. Once you hit your 50s then focus on shortening your mortgage. Simple as that. And even after paying off your mortgage you will still need to pay rent to the local council, something called 'council tax' - that goes on forever and you can't pay it off.

[@JamesColemanChess]

Great perspectives. I actually enjoy overpaying on my mortgage when I can (enjoy is not really the right word but you get the idea). I like the fact that the money is gone, I no longer have access to it, and that there’s no ‘pot of gold’ in the future that I’ll potentially spend on something irresponsible!

[@paulkelley8371]

Interesting. You mentioned emotion right before a building a logical case for early payments on the mortgage. I guess life is always a bit of both. Thanks for the tips.

[@Teamshmo]

Owning the house and knowing no matter what you have a place to live is amazing. So much potential worry is gone. However, making more money is also excellent because you could earn more in the short term and take a huge chunk out of investments and pay the house off all at once later if you wanted. I would say it's more about how stable your job is. If you are a teacher, government worker, etc it's almost impossible to get fired. Makes more sense to invest. For anyone else you really gotta look at our life and decide what's best.

[@stevecash9761]

acknowledging emotion is awesome, insightful and appreciated

[@davidpearson243]

We had £250 per month spare when we were younger we chose to spend on holidays with children and so pleased we did !! We still have 90 k on the mortgage but both are 55 and have final salary pensions our lump sums combined come to 150k now so we could pay the mortgage off with that and still have a bit left over if we choose to retire We both started paying our pensions at 19 what a good investment that has turned out to be

[@cp4512]

With UK mortgage rates now double than in this video (and higher than the assumed 5% return of investing) and still heading upwards the case for paying off your mortgage is certainly a very strong argument.

[@jackpilkington6770]

Completely agree with you in relation to the assumed returns. 6% in a Stocks & shares ISA is conservative, 5% extremely conservative. Don’t listen to those people banging on about 0.1% returns! Pension vs ISA was a great video!

[@stephen6262]

I paid off my mortgage about 6 years ago. Was so happy. But i then bought another house. By march i will have paid it off. One thing is certain i will never get another mortgage.

[@eggbert6900]

Another great video. Good job! The interest on the mortgage isnt "guranteed" though, I would say. Interest rates can (and probably will) change, and so the amount you're saving will fluctuate as they do (as its unlikely most people would be on a fixed mortgage for as long as you highlight in your example). I think its worth adding as well, that the way mortgage payments are calculated, you predominantly pay off interest at the start, so overpaying early, even when interest rates are significantly below historic equity market growth rates, can make even more sense if you anticipate interest rates will rise when your initial mortgage term runs out.

[@thomasJF85]

This is a great point. Saving interest by paying off early is a fact, however the amount of interest you save could actually be higher than expected should interest rates rise, as they are likely to do over a 15--20 year period. Paying off more while they are lower will have a benefit when the rates rise. Use a calculator and see what your payments and total interest would be with an interest rate say 4.5% and it can be a big difference on a larger mortgage. Worth considering too. In addition, you can use what you have made in investments to chunk a lump sum off if the rates were rising but some mortgages will only allow say 10% of outstanding balance to be overpaid so that might not be ideal for some. Ultimately, as some of the other comments say, a good option for many is to do some investing (which carries a risk element) and some paying off the mortgage. As much as anything for your mental health and well-being.

[@paulwalker2133]

It’s guaranteed in that you cannot possibly lose your money. If you invest in equities it’s possible to lose some or all of your capital investment. You may end up with less money than you started with. If you pay off your mortgage you are guaranteed to get the return that is the interest rate of the mortgage.

[@timetraveller3063]

Overpay your mortgage. Then open a Free Trade account that allows fractional shares. Chuck any spare change into either NVIDIA, or another FAANG stock and keep on doing this. You will be rewarded. Index funds are fine if you have 20 plus years. If not, then NVIDIA or any of the FAANG stocks.

[@hope4surf]

This is awesome! Thank you and Happy New Year! BTW, I HATE debt. It takes away a person's financial freedom.

[@paulclark9968]

Every spare Pound i earned i put towards ending my mortgage , finished it in ten years, who the heck wants to be paying that every month for the next twenty five years, now i live a better life knowing i have a roof over my head until i pass away.

[@MrByrneyboy]

Hi Pete, great videos. You explain things really well and helpfully. As someone who is looking at early retirement, this is all really helpful. Keep up the good work and ignore any negative ninnies!

[@MeaningfulMoney]

I will! Thanks you for your kind words… 🙏🏻

[@danieloaken9485]

Another good job mate. Going off the examples you gave if you paid the mortgage off 4yrs 8 months early and you were no longer paying the £1060 per month and that was able to be saved without putting it into any sort of isa. You would have banked £59,360 a nice bonus for paying off the old mortgage early 👍

[@johnblaze8774]

It also depends largely on your goals in life. I took off 6 years of my mortgage when I remortgaged for the first time. Could have stayed on course and paid around £300-£400 less than what I'm paying now. I decided to essentially overpay as my jobs haven't been stable and the kids nursery fees suck out all my extra income. At this rate, I'll be 42 and mortgage free with a London property. Could then work a low stressed job at my local supermarket and don't have to worry about my boss being a dick or company folding.

[@MeaningfulMoney]

Love this, John 👊🏻

[@johnblaze8774]

@@MeaningfulMoney And you have a new subscriber

[@johannesswillery7855]

You nailed it John. It is much easier to tell the boss to fuck off when you have no mortgage or rent to worry about.

[@mwas7669]

Am the same way reduce my debt and work whenever I want.

[@derrickdean7224]

What are property tax bills like in London? In my US City they are 1/4 to 1/3 the monthly mortgage payment. It's over $1k a month, so it makes it difficult to retire in place frugally. Most have to move to a lower taxed rural or suburban setting upon retirement. I pay extra on the mortgage, but i feel like property taxes will be a burden after i pay teh mortgage off. I prefer income taxes to property taxes for this reason.

[@benj6244]

Great video! I remember my granparents paying off their mortgage when I was young and having a family meal celeberating it! Being debt free brings a lot of peace of mind. It's not all about making as much money as possible!

[@MeaningfulMoney]

Absolutely agree, Ben!

[@slayerrocks2]

Bang on! I lost my job whilst still owing on my mortgage, and even though I have in demand skills, it really worried me. 2 years later, I paid it off. The relief was tangible. Then I started banging money into my pension, and getting the tax relief on that. That's an instant 20%, before it has even bought a share.

[@RobMidlife]

It’s an INTERESTing debate! I want to start investing heavily in stocks and shares, but I also remember when mortgage interest rates were at 15% and if history were to repeat itself in the next 10 years, I feel I would kick myself for not getting rid of the mortgage when I had to opportunity to ... Decisions, decisions!

[@gaurasrspublishing]

Yep Rob, I remember the 15% days and also being in negative equity when the property market crashed (couldn't afford to live in the house but couldn't afford to sell - certainly very black financial days for me personally) and unless you've experienced that it's easy to be blasé about such things; though I don't see those days returning any time soon. But it doesn't need to be an either or, it can beboth. Good luck with whatever you decide.

[@guyr7351]

Rob, as Anonx says no simple rule for everyone, one thing though with rates so low overpaying while not saving large amounts of interest it does get you a bit of a buffer if things do go crazy with interest rates. Even more critical is to get rid of any credit card debt, their rates are stupid. I have one card only and that’s a zero interest card, when the period is up I cancel it get another. Allows for emergencies plus any special purchases that can spread the payments out on.

[@sterlingbelford5698]

Do you not used fixed rate loans? If you lock in now, increased rates wouldn't be a factor

[@guyr7351]

@@sterlingbelford5698 yes we do now, but back in the 80’s and 90’s in the UK fixed rates were a rarity, also a lot of mortgages sold interest only being paid paired to endowment policies. That crashed big time with millions in compensation being paid out

[@callummcintyre1877]

Provided the market is at a good position at the time, you could sell your investments and pay a lump sum of your mortgage if that was to happen. Depends on the overpayment limit of course. Todays interest rates are so low Its hard not to focus entirely on saving for me.

[@Kcducttaper1]

Wise man! Understanding the importance of your spouse in this situation is often overlooked, but very important!

[@KOLAFlipper]

Perfect timing Pete. This is exactly the position we are now in. We are now able to pay an extra £300 a month off our mortgage, but we are now splitting it, £100 off the mortgage and £200 into a stocks and shares ISA. With 19 years left on the term we have both time to ride out the highs and lows, as well as making a small dent in the actual full term. In 10-12 years we can start “drawing down” the ISA so that covers all or part of the monthly mortgage repayment and therefore reducing our reliance on full time employment.

[@MeaningfulMoney]

Boom! Love this!

[@ageisonlyanumber8334]

I am doing both, I am trying to save $10,000 a year in an IRA (American here) and a taxable account WHILE paying an extra $265 per month on the mortgage to pay it off in 10 years. I am 60 and plan to retire at 70 (spendthrift husband makes me want to save more). One thing I have never heard mentioned in these mortgage payoff numbers is the payment savings. If you pay your mortgage off 4 years and 8 months you ALSO save the $45,921 you would have paid in additional payments to finish out the 20 years.

[@mattsennett]

Thank you Pete and for me this video is so reassuring right now. I have always overpaid my mortgage and invested via EIS / SEIS but am now in a position to clear my mortgage or invest more heavily. I / we decided to go down the mortgage free path as the "security" of it outweighs the potential gains that may be made via bigger investments right now. The monthly money that was being used towards our mortgage will instead be allocated towards raising our investments so that the drip fed approach in the next few years will help to smooth out the peaks and troughs you touch on due to Covid etc.

[@rkwatchauralnautsjediparty7303]

Brilliantly articulated, sir. I’m in hard-number mode right now, but completely see the other side of this coin.

[@MeaningfulMoney]

Thank you!!

[@russj4852]

We're told from being young that you should pay off your mortgage as quick as possible. It's a poor person mindset (my parents force-fed it to me for years). Understanding the simple mathematics and data behind investing vs. overpaying was for me a game-changer. Carefully managed investments and even sensible borrowing (not to buy pointless stuff, but to invest. Especially in this extremely low-interest environment) are the path to wealth and financial freedom! You do well to strip emotion out of such choices and rely on the hard data and mathematics.

[@jpmcoy22]

someone’s in denial of their humanity. You can’t ask a fish to fly, and you can’t ask a human not to have emotions. You can’t just ignore millions of years of evolution, better to make decisions given the fact that we are emotional creatures. Paying off debt may not be the best choice mathematically, but it is holistically a better financial decision for most people.

[@russj4852]

@@jpmcoy22 I would agree that for many people it's the obvious choice, which to me is sad. I think that there is a whole generation of kids that would be better taught about sensible investing and the power of compounding, good debt etc. Rather than being fearful or such things as I and a lot of my peers are/were. I also think you have to group mortgage debt in a different camp to credit card type debt which should be paid off immediately. It's not even about stripping away emotion, more about understanding alternatives and being realistic.

[@jpmcoy22]

@@russj4852 I wasn’t suggesting that people paying off debt over maximizing alpha are misinformed. It’s actually the opposite, people who think that maximizing your gains at all costs are the ones who are misinformed. that’s what’s sad, and there’s proof. There are actual studies (>10,000 participants) showing that majority of people who started with nothing and became millionaires did so by not having any debt (good or bad). While there are some who have gotten wealthy by leveraging debt, those people are the exception and not the rule. Paying off debts first AND THEN being being aggressive with your investments afterwards IS THE FORMULA for getting wealth the fastest. It’s not based on theory, but based on actual reality.

[@rccr528]

@@jpmcoy22 Can you provide a cite/link to those studies?

[@regisnewgate]

"overpaying mortgage is a guaranteed albeit lower returns"

[@eezy251able]

For me paying off my mortgage makes no sense if interest rates are so low and I've been making an astonishing amount of money in crypto. Paying of your mortgage is a great peace of mind and nothing wrong with that, however don't make it a priority if it's going to make you cash poor? All depends on the individuals age and risk.

[@SeniorNI]

What if you lose your job or get sacked? Less freedom with a mortgage

[@eezy251able]

@@SeniorNI Yeah being debt free is peace of mind and risk free. However the risk I'm taking if I want to become wealthier in the long term is to invest. Nothing is guaranteed in life except death and paying taxes!

[@samuelfranklin4366]

@@SeniorNI then he will have more money in liquid investments with which he can formulate a strategy to cope with his hard time.

[@pioneer7777777]

I chose a bit of a middle ground by choosing a 20 year term instead of 30 year. That way we don't have to have the debate of whether to contribute extra on a 30 year, it is just baked into the mortgage. We can afford the higher payments and still save quite a bit on interest. I also like that even just a couple years into our term, over 60% of our payments are going towards principal instead of a majority going to interest.

[@Bosshog-WealthHealthBetterment]

I had this discussion with my wife recently, and we agreed to max out our ISAs first, but then after that anything extra can go toward mortgage repayment. We are basically the same as you and your wife. I appreciate that it's technically less optimal financially, but it's a great way to incentivise us both to cut back a little and reduce spend. Paying off her home is a big deal to my wife, and she's prepared to make great sacrifice to reduce that debt, which is a bit odd to me but ultimately she contributes materially to our income and her views obviously matter. For her, there is no benefit in our investments for over 2 decades so it feels less "real", whereas paying less on a mortgage is immediate and can help further if you achieve certain LTV thresholds like 10/25/40% come re-mortgage time. Ultimately I can think this is silly, but even if I did (and I do understand a bit where she's coming from), it matters to her, and so it matters to me. Especially when my choice is effectively spend or overpay mortgage :D

[@MeaningfulMoney]

Love this - thanks for sharing! 👊🏻

[@isaacyoung1868]

That was deep and brilliant advice. Really gets to the core of the money decisions that we have to make. Especially liked hearing the part about the need to sit down and decide what to do whenever there's a bonus check or other gift received..

[@MeaningfulMoney]

Thank you Isaac - appreciate the feedback 🙏🏻

[@diongallichan6395]

Could the next Video be, Pension Vs a Buy to Let Property....

[@vulgartrendkill]

for the 1st 5 year fix on my mortgage, I overpaid and saved a few k in interest and then had less to pay off going forward. Now I do a combination. It made me feel great seeing the mortgage going down quickly!

[@derrsonn]

I’ll add two things: - Paying off mortgage during high inflation periods is a great hedge against the declining value of your currency - Paying off mortgage early in low inflationary periods isn’t as great because near the end of your mortgage term, the money will have far less buying power and will be less of an impact to your buying power, especially since most people’s incomes increase as they move up in their career life

[@jthomasstthomas]

Thanks so much. We are really working on paying off our mortgage and this helps me to articulate why.

[@MeaningfulMoney]

Glad to help Thomas!

[@Bradleyinternational]

One thing which you forget to mention is that by increasing your equity, it is likely to mean that when it comes to remortgaging then the rate available may be lower than the competing ones at the time this improving your relative “saving”. This has made a big difference to me over the years

[@MeaningfulMoney]

That’s true - I definitely missed this so thanks for sharing!

[@minimad8793]

I think from watching the multitude of videos on you tube and elsewhere, is that the higher the mortgage amount owed, the more I would ere towards overpaying the mortgage as the LTV at the end of the fixed period (if on one of these) is where you will see the benefit. with that, when you remortgaged, did you take any of the term time off or just kept the same timeline?

[@gerrycorbino66]

Very sage advice. Have a mortgage that is on the high side, but under $50K balance so no lender wants to refinance that amount. Wife & I are retired & have enough income & savings to live comfortably. I overpay the mortgage & ahead in my payments. I'd like to pay off the loan within a couple of years, but my wife is afraid of needing the money in the future. She also won't invest the funds so I'm thinking pay off the mortgage & be debt free. Our credit cards are paid off each month so mortgage is our only debt.

[@playingFTSE]

Ooh we just did this one too Pete. Such a tough subject, head over heart. Mathematically no-one really should do this taking current interest rates, but in the same vein we've never met anyone that regrets paying off their mortgage earlier. Great video 👍 (and topic!)

[@MeaningfulMoney]

Ah, sorry about that - hadn’t spotted that you’d done it - no intention of stepping on your toes!

[@playingFTSE]

@@MeaningfulMoney no worries at all Pete. The more the merrier. And yours is way better 😁

[@Robbo1966]

Brilliant advice and ive subscribed, many thanks

[@MeaningfulMoney]

Great to have you with us, Paul!

[@pauljones5403]

Happy Wife … Happy Life comes to mind Peter!

[@MeaningfulMoney]

I was thinking it, just didn’t say it!

[@mark2talk2u]

One place to start: Normally, it doesn’t make sense to be retired and still owe on a mortgage. Therefore, one can aim to pay off all mortgages by age 65 (or, whatever age you choose to retire).

[@raniakme]

Know nothing about investment except recently - thanks to your videos Overpaid in my mortgage Then oops, divorce coming on my head, and now I regret all my overpayment because they will be evenly shared 😅

[@PDCRed]

The key element here is time. If you are paying 2% or less on your mortgage for many consecutive years then you have time for the market to beat that hands down. Over 10 years you'd beat any crash too. Long term investment reduces risk to almost nothing.

[@Mellowyellow8888]

Yeah it depends on location.. In the US you can get a long low fixed interest mortgage for like 20 years.. in like canada I think the longest is like 5 years or so and some are even variable rate.. so it depends where you are living..

[@tarquin161234]

The other bit in maths that people often forget is inflation: the more currency devalues the less amount of debt you have. My plan is to take a max term mortgage.

[@mysterioanonymous3206]

Thats true, but that's only beneficial if your wage/income keeps up with inflation, and that hasn't happened for a long time now in most countries. And don't forget, while historical average returns in the market have been good we're also talking about a decade, you could even go back to the dotcom bust on a smaller level for two decades, where we experienced the largest monetary expansion is human history (esp. since 2008). The correlation is absolutely proven at this point. I think a lot of people are somewhat too optimistic. Say you were invested in Japan before that bubble popped (around '91), you're still down in 2022. So while particularly US markets have been doing well, that's no guarantee for the future. There's that one thing everybody says but few really get the implications and importance of: Historical returns are no guarantee for future performance. And that's very, very true.

[@1evilpie]

I just recently got my timing spot on by re-mortgaging for 5 years at 0.91% The reduction from my previous rate of 1.89% covered £7k of early redemption fees it was so stupidly cheap. Don't imagine I'll be over paying that one any time soon. Great video as always. Thank you.

[@johntheaccountant5594]

What provider gave you a mortgage fixed for 5 years at 0.91% ? 1.89% - 0.91% = 0.98% £7,000 redemption fee break even on the 0.98% would mean the mortgage was £7,000 x 100% / 0.98% => £714,285 mortgage I would estimate. Basically the redemption fee was 1% of the outstanding loan?

[@JackD87]

@@johntheaccountant5594 probably Santander. We just dropped to 0.99 from 1.6! Very pleased

[@markfaulkner5135]

@@johntheaccountant5594 he’s got a 5 year deal so breakeven mortgage is £143k, not £714k. John The Accountant? Surely a misnomer…..

[@markfaulkner5135]

@UCHLKdKPzuKvQNyOemveWiJA not a great “guess” then, was it….fundamental error

[@1evilpie]

@@johntheaccountant5594 Sorry I thought I'd replied to this but looks like it didn't post. It's with HSBC but it wasn't around for long, same mortgage now is at 1.59% so I really did get in at exactly the right time. Mortgage is about £430k so saving about 1% saved me enough over the two remaining years on the fix to cover the ERC and fee.

[@rodgerq]

I'm a pessimist with most things but especially finances. We are in our "forever" home which we are stretching a bit to pay, a sacrifice we are happy with, and really want to nail it down given that if interest rates shoot north we may have to sell which would gut is both. With that in mind we will be overpaying the mortgage starting next year. We still invest a very small amount but the mortgage will be getting hammered to the point where it's at a comfortable enough amount that even if interest rates go up or one of us ends up out of work, it will still be affordable. Only then will we begin to invest more heavily.

[@aficio698]

Emotion - yes. The feeling of owning my home trumps all. We live in uncertain times, no mortgage gives some foundation in life. 🤓

[@james2614mc]

Thanks for this. I'm 29 and have 20 years on my mortgage left. I'm self employed and have just started earning decent money after quitting offshore to go it alone. I'm currently spliting my money at the end of the month into 4, 1/4 goes into my premium bonds, 1/4 off the mortgage and the other 1/2 into my S&S ISA. Doing a little of all of these is the best thing for me

[@ericlee2931]

You gonna be wealthy by the time you hit 50

[@james2614mc]

@@ericlee2931 sure hope so, investing and saving money is one of my hobbies as silly as that sounds