Ultimate Guide on Paying off Mortgage Early vs. Investing

We are trying to figure out if we should focus on paying off our mortgage early or invest in the stock market.

Here is a summary of the three options: Option #1:  Pay the minimum amount of $1,525 on our mortgage and invest the rest into index funds. This amount doesn't include insurance or taxes.

Option #2:  Split the extra money between the stock market and paying off the mortgage early.

Option #3:  Focus 100% on paying off the mortgage early every month. We would have the mortgage paid off within 5-years.

Monthly Expenses The amount of money in our taxable investment account will grow from our monthly deposits, appreciate (hopefully), and grow from dividends.

Cash Flow If we end up retiring early, we will want to reduce our monthly expenses. But given that our cash flow is not a significant concern for the next 5-10 years, we are fine budgeting for the $1,525 minimum mortgage payment until we figure out what we want to do.

Stock Market Risk My biggest hesitation with Option #1 is the risk of having so much money in the stock market.  But the benefit of our scenario is that our timeline is flexible. 

What about saving on mortgage interest? One of the benefits of paying off the mortgage early is we would save on the amount of mortgage interest paid through the full term of the loan.

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