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This week on Money and Investing, Mitch Olarenshaw and I discuss one of the most common financial questions: Should you pay off your mortgage or invest your extra cash? We break down the benefits, risks, and practical strategies for different income levels and life stages.
1. Peace of mind from paying off debts
Clearing your mortgage provides psychological relief and financial security. Less debt reduces stress, and simple steps like fortnightly instead of monthly repayments or adding overtime earnings to the principal can cut years off your loan.
2. The power of side hustles
Additional income sources can speed up mortgage repayment. Even modest extra earnings, when directed straight to the loan, can make a big difference over time.
3. When investing might win
Investing surplus funds can potentially outperform paying off debt, especially if returns exceed the interest on your mortgage. For example, an index fund averaging 9% could work harder for you compared to a 5% mortgage rate, though this requires a longer-term view and acceptance of market risk.
4. Situational factors that matter
Decisions depend on income level, lifestyle, and stage of life. Higher income earners may manage both strategies at once. Families planning for children may prioritise debt reduction to ease financial pressure. Meanwhile, falling interest rates may favour investing, while rising rates make debt reduction smarter.
5. Education and flexibility
Understanding tools like offset accounts, tax implications, and investment basics helps you make informed decisions. Financial choices also need flexibility—life changes such as career shifts, children, or retirement will influence whether debt reduction or investing should take priority.
For more Info about Money and Investing, you can go to the podcast; The Wealth Playbook: Your Ultimate Guide to Financial Security; and The Wealth Playbook by Andrew Baxter – Audiobook, which is on Audible.
Disclaimer: Wealth Magnet Pty Ltd (ABN 52 618 868 830) trading as Australian Investment Education is a Corporate Authorised Representative (CAR no. 1255231) of Grange Financial Services Pty Ltd (AFSL No. 488609).
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
