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“Investing,” Via Your Mortgage

Prepaying-You-Mortgage The Globe’s John Heinzl says “paying off your mortgage is the best investment you could make. Period.”

He writes, “It's almost impossible to find an investment that is guaranteed to yield a higher after-tax return than you'd get by paying your mortgage down.”  Moreover, he says, “I don't think interest rates are going to be this cheap for that long, I really don't.”

For someone in a 40% tax bracket, pre-paying a 4% mortgage is like earning 6.7% on a GIC, with zero risk.

So why don’t more people do it?  Heinzl says it’s because wealth managers don’t get paid when people make mortgage pre-payments, so advisors don’t push them.

Of course, there’s often a case to be made for diversifying your assets and/or investing in higher-returning alternative investments (if you can accept more risk).  So, speak with your financial advisor for their take. Just make sure they’re open-minded about allocating at least a portion of your money to debt pre-payment.

Read more of: The best investment? Paying off your mortgage