Should you pay off your mortgage first, or invest first? That’s a question being asked and debated a lot. In this post let me walk through a few key points to consider when making this importatnt financial and life decision.
Let’s look at the numbers first
First, mathematically, you should compare the mortgage interest rate, with the expected investment return (post expense and tax). If you have a 2% fixed interest rate on your mortage, and you can get 6% return on your investment, then perhaps it’s worthwhile to consider investing the money because your gain (6%) is much higher than your interest payment (2%). P.S. When you calculate your investment return, don’t forget to remove the expenses and taxes you paid for the investment.
New era of high interest and (potential) low return
However, don’t forget we are now entering an era of high interest environment where mortgage interest rate can be 5% or higher. On the other hand, investment return has become uncertain as we have already been through a decade of high return in the market. So do you still expect investment return outweights mortgage interest rate?
Most importantly, the psychology side of the coin
Above are only the maths. We are human with hearts and emotions, not robots or computers. So having a peace of mind and good nights of sleep are often more important than getting the highest returns. If you can sleep better with a fully paid off house, then you should consider paying off the loan first. Studies have shown after fully paying off mortgages, people generally are in a much better pyschological state, more relaxed, productive, creative, and more willing to take risks, which potentially leads to greater returns in the long run!
首先还是先还清房贷，还是先进行投资呢？这是一个被频繁讨论和辩论的问题。在这篇文章中，让我为您逐步介绍一些在做出这个重要的财务和生活决策时需要考虑的关键要点。
让我们看看数字
首先，从数学角度来看，您应该比较房贷利率与预期的投资回报（扣除费用和税款后）。如果您的房贷利率是2%，而您的投资可以获得6%的回报，那么也许值得考虑投资，因为您的收益（6%）远高于您的利息支付（2%）。附注：在计算投资回报时，请不要忘记扣除您为投资支付的费用和税款。
新时代的高利率和（潜在的）低回报
然而，请不要忘记，我们现在正进入一个高利率的时代，房贷利率可能高达5%或更高。另一方面，由于市场已经经历了十年的高回报，投资回报变得不确定。那么，您是否仍然期望投资回报能够超过房贷利率呢？
最重要的是，心理层面的考虑
以上只是数学上的考量。我们是有血肉有情感的人类，而不是机器或计算机。所以拥有内心的平静和好的睡眠质量通常比追求最高回报更为重要。如果您能够因为还清房贷而睡得更安心，那么您应该考虑先还清贷款。研究表明，还清房贷后，人们通常处于更好的心理状态，更加放松、富有创造力，愿意承担更多风险，从而潜在地在长期内获得更大的回报！
For other topics on financial intelligence, you can find it here https://nickandmoney.com/category/fi/
nick and money – improve your finances and wellbeing