I’ll preface this with the disclaimer I may be missing something obvious but considering these assumptions:
– a person has a mortgage (at say 4.5% today) and they choose to pay that off monthly (not interest only)
– the opportunity cost of this investment would be a conservative 6%/year in ETFs or REITs (of course this is tentative and an average over the long run)
(See for return references: https://www.fool.com/research/reits-vs-stocks/)
Why would a person choose to pay down their mortgage rather than invest in the markets? The pros of greater liquidity in the markets and greater diversification in REITs seem to make it the preferable choice?
For context, I am a 24M considering the best route to financial independence for myself and future family.
Thanks in advance.
In: Economics
I have a 5% mortgage. I routinely beat 5% in all of my investment vehicles. I would pay off my house tomorrow if I had the money.
I absolutely understand that from a purely mathematical perspective, it’s the wrong decision. However, there is a level of immediate financial freedom and real security that comes with owning your own house and being out of major debt. Knowing that if something crazy happened, and my wife or I were out of work for an extended time, we’d still be able to stay in our home – that counts for a lot.
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