What should come first—in my retirement strategy, investing or paying off my home mortgage? 22

From the US, I paid off my home right before Covid. Truly the BEST decision I ever made. The feeling is absolutely incredible

I paid off my mortgage 13 years early. I couldn't afford overpayments so I sold up and downsized from a 3 bed semi to 3 bed mid terrace in a cheaper area which is now a property hotspot and my house is now worth the same as the 3 bed semi. I managed to clear my credit card debt and now have savings. I left the job I hated which was even better, it was beginning to feel like a life sentence which is what a mortgage feels like when you are buying alone and have children.

The best investment is the one that gives you the best sleep. I paid of my mortgage years ago ZERO regrets.

I paid of my first mortage in 5 years by age of 28
8 years or so later I moved house and took out a 30k mortage which I paid off in 5 years
Few years later moved in with my long term gf
She sold her house , I sold mine and bought a house together , got another 30k mortage and paid that off in 3 years
My reason
No matter what happens to the market
What happens to your health
Or what happens to your job
If you have no mortgage your in a much safer place and will always have a roof over your head

I'm in my twenties, lucky enough to have a mortgage and I look at all the data but my emotions are getting the better of me. I agree with lots of other commenters that I like the sound of the security of owning my home outright. Although the maths checks out in a lot of historical scenarios, I'd rather continue to pay the mortgage and make some contributions to my SIPP (not an employee). I bought the house with the current high mortgage rates but look at some who have been hit very hard after getting used to the low rates. The ISA model doesn't seem to have enough of a reward - and the pension would be too risky if mortgage rates spiked and I'd be unable to access the cash before I'm 58.

Not to mention the additional equity may help if we decide to upsize in the future (no plans for kids but I might want a big garden).

All in all, a great content James. Very thought provoking!

I paid off my mortgage early. No regrets what so ever, not for one second

The peace of mind and flexibility inherent in have a fully paid off house is massive - especially if you have a family - if the loss of your home would be an absolute disaster then paying off the mortgage is a good move unless the gains are very much more likely and also greater in scale.
Pension funds fail, stock markets crash, jobs can get lost, pension rules change, isa rules change …

I asked myself this very question 5 years ago when I started taking my mortgage and investing very seriously. Came up with the same conclusions as far as the best answer on paper. But then there was the 'sleep at night' factor. Couldn't really decide, so I went with 50/50. Every extra dollar and windfall was split 50% extra on mortgage, 50% investing. Of course, the investing route has produced much higher returns, but there have been plenty of soft spots in the last five years that would have left me with little sleep. I plan on not changing a thing going forward. The house will finally be paid off in 5 more years.

I'm 34 just about to buy a relatively cheap flat with 25% down. I'm gonna be paying off that mortgage as quick as I can (hopefully 5-6 years). I really can't hack risk, I'd rather feel safer with less money.

Interesting analysis! I would also factor in inflation (unless this is already done). A 100k mortgage on a house may only be worth 60k in "real terms" . Time itself and printing of money is favorable + an added bonus every year.

I don't intend to pay off my mortgage early, but invest into my pension and ISA and use both to draw down on in retirement, and I will continue to invest in my ISA after I retire, although on a less risky portfolio.
The way I see it is I'm 53 with about 76k left on my mortgage and not enough in my pension yet. I will still be working anyway when my mortgage comes to an end, so don't really see the point of overpaying for no reason. unless interest rates go sky high that is. Would much rather invest as much as is practical while still having enough left to have a life, plus I also have a big emergency fund so got that covered as well. I'm sure there's probably better options out there, but I feel comfortable with this strategy.

I bought my first place (in Norway) in 2007 with a 25 year mortgage (if I remember correctly). I bought a second property in 2010 (with a new/readjusted 25 year mortgage). I paid off the last of my mortgage six months ago, and the value of my properties since I bought them has just about tripled. I would always put financial security above any potential future returns.

James, this was a masterclass in this concept. well explained, thoroughly researched and brilliantly presented. It has really helped me get clarity on my dilemma as the profile you mentioned is similar to mine. Going to overpay first.

This is fantastic! I have asked myself this very question quite a bit and discussed this with my wife too. We came to a very similar conclusion, since we don't have nerves of steel when it comes to these things and life is too stressful to be able to afford this on top. Great analysis and reasoning. Well done!

I’m not fussed about paying a mortgage off early. I know it may financially cost me but i saw my dad’s wealth get absolutely decimated by inflation as he wanted his mortgage gone ASAP. He hasn’t had a mortgage since 1994 and he’s worth WELL over a million quid less than he could have been if he’d have been more than 99% conservative with his outlook.
Being mortgage free must be a lovely feeling, and i know there’s things you can do with the money once you’ve paid it off to keep above inflation, but in my own experience being mortgage free has come at a HUGE financial cost.
I’m not interested or intelligent enough to work out what i should do with the paltry sums of money i save so i stick £100 a month in a Vanguard 100% LS (which will be heavily increased in the future but i have a very young family ATM and i’m far from a high earner) and i want a mortgage for as long as possible as it seems to me to be one of the ‘easiest’ ways for a life time of investments to at least match inflation, or beat it.

I think this discussion becomes far more interesting when you account for the possibility of additional pre-payments on your mortgage. I got a 15-year fixed rate at 6.3% (Peru). At those rates, especially early on in the mortgage where payments tend to be more interest-heavy, every dollar paid early equated to a dollar less in interest later on. Essentially it's guaranteeing a 2x return since the money put in becomes instant equity while also shaving off interest to be paid later. Mind you, I bought this home at age 30 so I felt more comfortable doing this now knowing that I'll have this place paid off in probably 7 years and will then have more free cash to invest. But I can't think of a safer way to lock in a 2x.

Bought my condo in 2011 with a 30 year mortgage at 4.85% interest rate. Paid it off in 2019 because I hate paying interest. This was before I knew about dividend investing and "snow ball" effects. Was probably not the optimal move, in hindsight but not having a mortgage means I pile up savings month by month. Now I'm tempted to buy a retirement home in the Sunbelt but the prices and interest rate are crazy and my dividend investments are just getting rolling.

The way to think of this is a choice in gearing, rather than an either or. For me + my wife, whatever is left over at the end of the month we split 60%-40%. 60% goes in our ISA's, which is a mix of short term fixed income funds and high growth stocks to balance out. The other 40% is a mortgage overpayment. The other benefit of the mortgage overpayment is it goes against the balance not the term so our mortgage payment goes down. So the next month we have more spare cash which we then split 60-40 in the same way.

I was going to invest my £98k but then my mortgage came off it's deal and the payments went up to nearly double, which meant that over the next 15 years the interest payments on my mortgage would be higher than the return on any investments. I ran all the current data and paid off my mortgage.

Bear in mind that all the monthly mortgage payments are now going into my pension, instead of to the mortgage lender, so I'm actually investing that £98k anyway, plus I'm investing the £50k interest I would've ended up paying (or whatever it was going to be).

Great content. We’re on the pay down plan. Biggest thing for me is pay off early, invest more when paid off.

The numbers may say different but the feeling of having no mortgage is significant. What ever the world maybe doing as emotional beings the security of a home is unquantifiable. No mortgage gives options and flexibility. Great content as always.