How Do I Pay Off My Mortgage and Invest at the Same Time?

Having a long-term debt can feel like a serious restriction on your freedom. Most homeowners on a 30-year mortgage are wary of putting extra cash into investments so they can use it for home payments. However, the money you save from seeing your mortgage out to its terms coupled with profits compounded from safe long-term investments is what grows your wealth. This helps you prepare financially for retirement.
 

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Why should I stretch my mortgage out?

Whether or not it is the right time to invest depends on the type of debt you’re in. Generally speaking, there is good debt and bad debt. Shawn Tydlaska of Ballast Point Financial Planning shared with CNBC. That being tax deductible as well as low interest is what makes debt good, so to speak. What is considered bad debt is high in interest. Student loans and mortgage payments fall under the good debt category, while credit card and car loans are classified as bad debt.
Of course, these factors aren’t the only good reasons for stretching out your mortgage. Nerdwallet explains that fixed-rate mortgage holders benefit from inflation because mortgage payments remain the same. By the end of 30-years, you would have paid significantly less for your home than if you cut your term by half. Being on a fixed-rate mortgage plan puts you in the perfect position to allocate extra money into small investments that can grow to appreciable amounts.

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How and where do I start?


Your first priority should be to get rid of high interest debt or bad debt before you reach for a brochure on the stock market. Once these are cleared, set aside a sizable amount for a cash cushion that will have you covered in cases of emergency. A homeowner who has liquid assets such as investments will be more prepared for such events compared to a homeowner who poured all of their money into a house. This is another reason for going for a long-term mortgage plan.

The next thing to do is to calculate your risk tolerance which The Balance defines simply as the amount of risk you can take as an investor. Assessing your risk tolerance takes into account your current financial standing which helps build an investment portfolio. It gives you an idea of what type of investments to get into, as well as the type of investor that you should be. 

A conservative investor may take low-risk investments like government bonds or health insurance. Health IQ explains that a better underwriting can result in lower monthly premiums which will be lighter on your pocket. Risk-averse types generally pay more attention to their health as well, so a smart financial move is to get a tailor-made policy that doesn't use generalized data. It also helps to enter this type of low-risk investment early, because plans get more expensive as a person ages.

Follow a balanced budget plan such as the 50/30/20 method where 50% goes to recurring costs including mortgage payments, 30% for personal expenses, and the last portion for investments. Whatever the method you choose, Diligent Dividend reiterates that keeping your awareness with regards to monthly expenses is the key to maintaining your balance and saving more money.

Time is your friend when it comes to investments, because the longer you allow them to mature, the bigger the pay-outs. Ultimately, it all boils down to whether you can handle the psychological burden of living with a long-term mortgage and being adept in balancing your debt and investments.