Most people want to become mortgage free as soon as possible. They value the freedom of not owing a monthly payment to a terrible bank.
But perhaps that isn’t the best attitude to have.
These days, mortgage rates are comfortably under 3%, with some folks even qualifying for loans under 2% annually. If somebody chooses to invest in the stock market-- effectively borrowing money at 2-3% to get an annual return somewhere between 6-10%- -they’re almost guaranteed to make money over the long-term. It’s the short-term that can be a little difficult.
Even if capital gains are elusive over the short-term, it’s very easy to invest the cash in a diversified basket of equities or ETFs that yield more than 2%.
Investing early means taking advantage of compounding, too. Even if someone aggressively pays off their mortgage and then uses that capital to invest, they’re still likely to end up with less money than someone who makes regular mortgage payments and invests the difference. It’s better to earn 8% over time than it is to pay down debt costing less than half that much.
It also opens up more opportunity. Somebody who aggressively pays down their mortgage at the expense of other assets has no option except borrowing against the house when they need cash. A person who invests can just sell investments to get money.
And finally, putting all your eggs in one basket can be a bad move. Imagine throwing every available cent against a mortgage and then having the value of the house decline 20%. If that happens, you’ll likely be pretty jealous of the person who diversified.
