I spend a good deal of time reading questions from investors. Call this professional development. Call it personal interest. Whatever it is there are certain patterns that emerge. One constant query is if it is better to pay off your mortgage or invest. And this makes sense. We all have limited cash and want to know the best way to use it.

It is challenging to write an article on this topic given the myriad of factors involved. The approach I’ve taken is to focus on the hurdle rate or investment return needed to increase total wealth more than prepaying a mortgage. The answer still isn’t straightforward.

It is impacted by personal factors. The interest rate on your mortgage. Your marginal tax rate. If the money will be invested in super through a concessional contribution or non-concessional contribution or if the investments will be outside of super.

If it seems reasonable that an investor would be able to exceed the hurdle rate it might make sense to invest any extra cash instead of paying off your mortgage. To read more about this topic please see the following articles:

I’ve also put together a spreadsheet that allows you to figure out your own hurdle rate based on your personal circumstances. 

Click here for: Mortgage hurdle rate spreadsheet

Any questions please email me at [email protected]