Tuesday, June 6, 2023
HomeMoneyInvest or Pay Off Mortgage? A Financial Decision

Invest or Pay Off Mortgage? A Financial Decision

Cry me a river, right?

When it comes to managing money, there are often conflicting opinions and ideas. This is especially true for couples who have different perspectives on finances. One reader recently wrote to me with a dilemma: he had sold a rental townhouse for $325,000 and was wondering what to do with the proceeds. His wife’s preference was to pay off their mortgage, but he was leaning towards investing the money. Who’s right?


The reader is a corporate attorney with a successful career, earning around $250,000 a year. His wife is an elementary-school teacher, making about $70,000 a year. They have two children, an $800,000 home with $491,000 left on the note at 3.25% for 30 years, and a retirement portfolio worth just over $600,000. Their only debt is the loan for solar panels and a car loan at a low-interest rate. They also have emergency savings.

The dilemma:

The couple has different views on how to use the money from the rental townhouse sale. The reader wants to invest the money, while his wife prefers to pay off the mortgage. She is a saver but struggles with emotional decisions when it comes to managing money.


While each situation is unique, there are a few points to consider when deciding whether to pay off a mortgage or invest the money:

1. Interest rates:

The interest rate on the mortgage is 3.25%, while the stock market’s historical long-term rate of return is around 9 to 11%. Over the long-term, investing in the market could offer a higher return on investment.

2. Risk tolerance:

Investing in the market comes with risks, including the possibility of market downturns. It’s important to evaluate one’s risk tolerance, especially during volatile market periods. However, investing in stocks for the long-term can help mitigate risk and offer potential gains.

3. Liquidity:

Keeping money tied up in the walls of a home can be illiquid and limit access to funds in case of emergencies or other opportunities. Home equity lines of credit can be costly and may not provide enough access to needed funds.

4. Emotions:

Making financial decisions based on emotions can lead to irrational choices. It’s important to evaluate choices based on logic and fact, rather than fear or sentimentality. It’s crucial for couples to communicate openly and honestly about their perspectives and concerns when making financial decisions together.

Related Facts:

  • The average American household carries about $137,063 in debt.
  • In 2020, the US national savings rate reached a record high of 33.7%.
  • About 42% of Americans have less than $10,000 saved for retirement.

Key Takeaway:

There’s no one-size-fits-all answer to the question of whether to pay off a mortgage or invest the money, but it’s crucial to consider factors such as interest rates, risk tolerance, liquidity, and emotions. Couples should communicate openly and honestly about their perspectives and concerns when making financial decisions together.


Ultimately, the decision of whether to pay off a mortgage or invest the money should be based on an individual’s unique situation and goals. While there are risks and potential gains to both options, it’s important to consider individual financial circumstances, risk tolerance, and long-term goals to make an informed decision. Cry me a river, right? At the end of the day, it’s important to take a step back and look at the bigger picture to ensure financial stability and success.

Denk Liu
Denk Liuhttps://www.johmm.com
Denk Liu is an honest person who always tells it like it is. He's also very objective, seeing the situation for what it is and not getting wrapped up in emotion. He's a regular guy - witty and smart but not pretentious. He loves playing video games and watching action movies in his free time.


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