Paying off your mortgage and investing your hard-earned money are both commendable goals. But is one better than the other? Which pursuit makes more sound financial sense?
Common sense suggests paying off debt should be the priority. Why?
In part because it simply doesn’t feel good to owe money. It’s called a burden of debt for a reason.
Indeed, approximately 40% of individuals with bad credit card debt say it impacts their happiness, and 20% say it harms their health.
The First Impression
After a quick look at the current interest rates and the average return of the S&P 500 Index, it seems like the answer’s a no-brainer.
Although mortgage rates climbed to 5% recently (for the first time in 10 years), they remain incredibly low from a historical perspective.
At the same time, the S&P 500 Index, which acts as a benchmark for the US stock market, has delivered an average annual return of 10.7% over the last 65 years.
Most people would take that extra 5.7% in a heartbeat. Surely, then, savvy homeowners are better off paying the minimum on their mortgages and investing whatever’s left in stocks?