A common question surrounding mortgages is whether it's better to pay down the principal on a mortgage or invest money somewhere. If you asked any number of "experts", you'd probably get an even split. For me, it all depends on how risk averse you are.

There's no guarantee that your investment will yield a return higher than the interest rate you pay on your mortgage, but it's possible. Furthermore, there's no guarantee that your home's value will never decrease (though it's highly unlikely - and today's housing market with declining home prices is definitely the exception to the rule).

Personally, when I can, I do both. I like paying extra on my principal but I also like having some money in the stock market or elsewhere.

What's your take on this subject?

I'd pay off my house first. If something goes bad it'd be nice to have that security and never have to worry about not having a place to live.

Pay Off Your Mortgage In Two Years

Each of the eight episodes aired weekly in 2006 focused on one family or individual, who at the time of filming had already been followed for twelve months, i.e. they were halfway through the experiment. In the follow-up series, aired in 2007, their experiences in the second year was shown. The participants were from all ages and from all walks of life, including a couple nearing retirement, families with young children, a lesbian couple and a male ballet dancer.

Success in the experiment required minimizing expenses as well as maximizing income. To achieve the former, participants grew their own food, for example. In pursuit of the latter, they sold off possessions, rented out their house or tried to develop various business initiatives, such as creating works of art, giving yoga or exercise classes, becoming a Cliff Richard impersonator or buy and renovate houses. In some cases, leaving the "comfort zone" and persevering required hard-nosed presenter Carayol to, in his own words, "push them to their limits". One of the participants, a single woman, gave up and was replaced.

Both, I would first save up no less than 6 months reserves and it could be placed into an account with a guaranteed return. Some can be as aggressive as 4.5%.

Then go for the mortgage pay-down.

But, the right answer depends on your age and future earning potential in combination with your current and future goals.

There are 2 types of people in this world:
Risk Takers
Conservatives

Risk takers either end up well off financially or they are sitting on a park bench homeless because they lost it all.

Conservatives just stay safe and they have less extreme ups and downs.

__________________
Greg Phillips
Manager
Fairfield Mortgage Company
"I can lend in 50 states"
Home Blog Forums

So which types pay off their mortgages early Greg?

Saving money and reducing debt is far more important.

It seems to me that if you are in the hole, why would you be risking money in the stock market? Shouldn't you get out of your hole first before you buy stock?