|
This works if you have cash in places not earning much interest (lower than your mortgage rate) and earn a fair bit more than your monthly expenses and you plan to throw every spare penny you have into paying off your mortgage.
It's a decent strategy with low risk.
But it's possible to do better if you take on more risk, instead of throwing everything you have at your mortgage (with low intereste paying only 3-5%), instead lets say you save 100k. Instead of paying off 100k of your mortgage, you can invest it and possibly earn 5-10% (mutal funds, etf, stocks, etc) . But that comes with risk, and you could possibly loose some/all of your investment. But you could be better off in the good economy than simply just saving your mortgage interest.
One advantage of this depending on your tax situation, you should be able to deduct your mortgage interest (upto 750k mortgages in 2018), reducing your taxable income and if your growing your retirement portfolio in a tax sheltered instrument (ISA, 401k, etc), your deferring your tax burden (contributions lower your taxable income now) and that investment grows tax free until you withdraw when you retire (hopefully at a lower rate when you retire and withdraw when you have a lower income than you make now) or taxable at a lower rate depending on the investment.
The options are pretty much endless assuming you are cash flow positive. If you can't pay your current bills and live beyond your means, no strategy is going to help you without reducing your spending/expenses.
Now if you think a recession is coming and you will be hard pressed to earn 5-10%+ on your investments, you should be moving all of your investments into low risk areas, or staying liquid or paying off your mortgage could be good idea.
|