Personal Finance 1

One of the most often asked question, should I pay my mortgage or invest the money, alway an interesting question and the answer always varies.

Not one answer fits all. It depends on many factors. We need to factor the age, motivation, risk tolerance, market conditions, structure of the loan and how stable is your source of income.

Taking myself as an example and my approach, I’m 45 and took a on mortgage for 25 years. Before considering paying the mortgage I first look at my finances and where I stand.

• Emergency funds – I have an initial 3 months emergency fund saved and I bump up this figure from dividends from stock investments
• No debts – I have zero consumer debts and only the house mortgage
• Retirement savings – I used my Kiwisaver(first home buyer/retirement savings) for my first home buy and currently replenishing it again, I contribute manually.
• College/University funds – I have 4 kids, I wasn’t able to save funds for my eldest education and hoping to help pay the student loan after. However I did start Kiwisaver for my 2 kids and 1 with an index fund savings. So these are funds that grow over time as I put more money into them.
• Pay off mortgage
• Build wealth and give to charity

The last three steps is where I don’t follow the baby steps and make my own. I am increasing my net worth by investing in term deposits, stock market and crypto. I have a modest stock investment which is focused on dividend investing, I’ve been doing dollar-averaging every month. For the dividends pay out I pull it out to build up my emergency column further.

As for my answer, if I should pay off the mortgage or invest? I have a fixed mortgage loan and making extra payment is only available before the renewing the term. I am allowed to make 5% extra payment to the loan amount. My strategy is to save up to get the 2-3% extra payment before renewal and the rest of the income I would continue to invest.