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Should You Pay Off Your Mortgage or Invest?

November 10, 2017

Do you ever daydream about the financial freedom you could experience if you were free of monthly mortgage payments? Without this significant expense, perhaps you could finally have the extra flexibility needed to reallocate funds for investments, and potentially position yourself for a more comfortable retirement. No-brainer, right? You may want to think again.

The word “debt” can carry a negative connotation. But not all debt is created equal. Although mortgage debt doesn’t fall in the same category as credit card or traditional loan debt, it can still feel burdensome. Living in a home that is completely paid off can be liberating, but paying off your mortgage early might mean a missed opportunity for growth. As you explore the pros and cons of shifting your financial focus from mortgage payments to investments, ask yourself these questions.

Is retirement around the corner?
You may be at a point where your mortgage balance may be a feasible amount to pay off before you reach your golden years. As you near retirement age, paying off your mortgage may be an important step towards a debt-free lifestyle. When a predictable paycheck is no longer an element of your monthly budget, it can be reassuring to not have to worry about high living expenses – like your mortgage.

If you are younger and have many years of mortgage payments ahead of you, it may be more beneficial to long-term financial growth if you chip away at your mortgage over an extended period of time. While you will be paying interest on the sticker price of your home, its value may increase over time. Treating your home like a long-term investment will pay dividends.

Am I confident in my current investment plan?
Regardless of your mortgage debt, investing is an important step in securing your financial future. A well-rounded savings or investment plan can help you maximize contributions and allocate dollars according to your risk tolerance. While investing can bring some uncertainty, reward often results from taking some risk. If you view your property as an investment, you may have a higher level of confidence in paying your mortgage long-term and setting up other investment accounts to compliment your planning strategy. Regardless of your decision to go all in or not, investing for retirement should always be part of your financial picture, but the extent is up to your discretion.

How will the financial decision impact my taxes and financial position?
For many homeowners, the mortgage interest deduction is a significant component of their tax strategy. It is worthwhile to speak with a tax professional to weigh the pros and cons of approaching tax time without a mortgage payment or opting to boost your investment strategy.

As with any financial scenario, it is essential to find the balance that best supports your budget and plans. A financial move that sounds smart may not always be the best option for you. Turn to a trusted professional or your local financial institution for further insight and to discuss the options that will be most beneficial for your financial future.

Jim Oosterman is the Vice President of Melrose Bank. He can be reached by telephone at 781-665-2500, online at, or on Facebook at

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