I’m looking for some advice about our mortgage situation. My partner thinks we should pay an extra $1000 monthly towards our 30-year mortgage with a 2.5% interest rate. They even made a spreadsheet to show it’s better than other options.
But I’m not convinced. Couldn’t we get a better return by investing that money in an index fund? With an average 6% growth over 30 years, it seems like we’d come out ahead.
What do you think? Are there pros and cons I’m not seeing? I want to make sure we’re making the best financial decision for our future. Any insights or experiences would be really helpful.
Thanks in advance for your advice!
Your partner’s spreadsheet approach is commendable, but the math favors investing in this case. With a 2.5% mortgage rate, you’re essentially borrowing at a very low cost. Historically, index funds have outperformed this rate significantly. However, there’s more to consider than just numbers. Paying extra on the mortgage provides a guaranteed return and peace of mind from lower debt. It’s also worth noting that mortgage interest is often tax-deductible, which slightly reduces the effective interest rate. Ultimately, the decision depends on your risk tolerance and financial goals. Have you considered your overall financial picture, including emergency funds and retirement savings?
Hey Sarah84! That’s a great question. I’m curious, have you and your partner considered splitting the difference? Maybe put half towards the mortgage and invest the rest? That way, you’re building equity and potentially earning higher returns. What’s your comfort level with market risk versus the security of paying down debt?
Yo Sarah84, I get ur dilemma. Investing could def give u better returns, but paying off the mortgage feels safer, right? Have u thought bout ur risk tolerance? also, don’t forget bout inflation - it might make ur mortgage feel cheaper over time. Whats ur gut say? Sometimes peace of mind is worth more than a few % points.