Ask the experts: Should you pay down your mortgage early or invest?

We asked 10 experts which is the right way to go, and the results were split. Most agree that it depends on your immediate financial situation, goals and life stage. 

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By

Hanna Horvath, CFP®

Hanna Horvath, CFP®

CERTIFIED FINANCIAL PLANNER™ & former Managing Editor, Growth

Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™ and former managing editor for growth at Policygenius. She helped produce the Easy Money newsletter. She passed her exam to become a CERTIFIED FINANCIAL PLANNER™ in November 2020.

Hanna's work has appeared in NBC News, Business Insider and Inc. Magazine. She is regularly quoted in top media outlets, including CNBC, Best Company and HerMoney. She has also appeared on the Money Moolala podcast and All's Fair podcast.

Prior to Policygenius, Hanna wrote for KNBC in Los Angeles and WNBC in New York. When she isn't writing, she's (often) running, (usually) cooking and (sometimes) doing photography.

Published March 24, 2021|3 min read

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Maybe you’ve recently come into some cash: You received a stimulus payment, your tax return came in or you won the lottery. Now you get to decide what to do with your money. If you’re a homeowner, one option may be to put the extra cash towards your mortgage. But considering how well the stock market has been performing, you may be wondering if you should invest the cash instead.  

We asked 10 experts which is the right way to go, and the results were split. Most agree that it depends on your immediate financial situation, goals and life stage. 

Should you pay down your mortgage early or invest? 

Mortgage: 4 (40%)

Invest: 6 (60%) 

Why some experts think you should pay off your mortgage

“I am not a believer in debt so I would put that money to pay down the mortgage before I would invest. This assumes the client has sufficient cash for living expenses and their job situation is stable.”

— Patricia Hausknost, certified financial planner at Exit Planning

“There are always two answers to the pay off the mortgage or invest question: The spreadsheet answer and the emotional answer. The emotional answer lies in the human preference to own their home free and clear. To make the best choice for yourself you need to balance these two approaches and pick the one that helps you of today as well as the you of your future.” 

— DeDe Jones, certified financial planner at Innovative Financial 

“There is a qualitative aspect to managing debt. For some, the feeling of being debt-free sooner may be more important than arriving at the optimal solution. This is a great example of why personal finance is often more personal than it is finance. Spreadsheets are great for helping with quantitative decisions, but the human side is equally important in helping guide the decisions that are unique to each person.”

— Brett Koeppel, certified financial planner at Eudaimonia Wealth

Why some experts think you should invest

“Many clients who have either purchased or refinanced a home in the last several months have 30-year mortgages with rates less than 3%. It is not a stretch to expect the long-term average return on a well-diversified investment portfolio to be at least twice that much. So, the answer would seem to guide the investor into putting any excess cash to work in their portfolio and making only minimum required payments on the mortgage.”

— Dennis Hunt, certified financial planner at Moisand Fitzgerald Tamayo 

“Assuming your mortgage rate is in the 3% range, you can generally earn a better return by investing versus paying off the mortgage.” 

— Michael McDaid, certified financial planner at RetirementDNA

“If you cannot retire the entire mortgage, you should not put the money towards that. Paying down some of the mortgage does not impact the monthly payment amount. Fully max out retirement savings for the year. Make sure you have a cash reserve. Then invest the money as rates are so low the person who cannot retire their entire mortgage should invest and needs leverage on their balance sheet.”

— Dominick Vetrano, certified financial planner at Fountainhead Financial