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@marko-whiteboard finance what about business mortgage of 30 years at interest rate of 4.5%?Does this also needs to be paid off or invest that extra money? Thank you for amazing video
That little story at the end seems an awful lot like meet Kevin, the guy with 20 homes who thinks they’re all gonna pay him!!! Enjoy you sharing your knowledge homie!!!
I'm the Jim of March 2020. My wife & I said countless times last year how happy we were that we paid our house off in 6 years. I lost 70% of my income in 2020 but we were never financially stressed.
I follow and love your videos. sadly, it's been a while since i visited it has been a very rough year... i am experiencing one of the most challenging phases of my life... Lost a fortune lnvesting in emerging companies. Hopeful, for a turnaround.
Agreed. Having 100% equity in your home allows you to be more flexible with cash flow and creates opportunity to invest more than you would have being tied down to a mortgage.
100% I do my 5% work 401k match max out Roth $6k and anything extra on that I throw at the principle that way I’m getting both of benefits still then once that mortgage is gone going bananas on my investments
I’m 54 and paid off my house in my late 30’s and have never looked back. The freedom you buy yourself is priceless. By doing that I was able to maximize my 401k which is pretax money I also live the way I want to live. I’v seen the economy go up and down and it doesn’t matter to me I know I have a place to live, the bank can never come knocking at my door.
I say pay off the mortgage. Being debt free is like walking on clouds. You become more bold in making career and investment decisions because you are not scared about paying mortgage.
For reals. We make around $10,000 a month and only have our $1500 mortgage. We went from working 5 days a week, down to two days a week and the feeling of freedom is amazinv.
Great explanation. At 49, I’m only making extra payments to ensure the house is paid off at 62. This affords me cash to invest monthly. Age does influence your stress and risk tolerance.
if you have any clue how to invest when the market dumps you buy a ton more at a huge discount and know a few years of your retirement date. Dow jones dumping doesn't put you out of a job.... so really who cares.
I'd love to see an updated version of this video with interest rates having increased along with such high inflation, all while the market is dipping. Thoughts?
Excellent video, by a great speaker. I'm in the same boat, I can pay off my house tomorrow if I wanted to, but currently have it invested. The benefit of owning your own home outright is that you feel more confident that you can quit your job and survive on "day-to-day" cash that you're making and not feel pressure over paying off a mortgage. Plus, the annual 1st of the month making a mortgage payment is always depressing. I'm leaning toward paying off the house.
One thing to remember...because I actually paid off my 30 year mortgage in 10 years....is that you still have to pay INSURANCE & PROPERTY TAXES....so want to ensure you save that up each year as you lose the comfort of an ESCROW account. Additionally need to save for maintenance & repairs....so you never really get totally out of debt, but at least don't have send the mortgage company a check every month! :)
Great video as always. I’m blessed enough to be able to be doing both (brokerage and extra mortgage payments) in addition to our retirement contributions. I’m paying extra mostly into the mortgage right now. As soon as the market takes a nice dip, I’ll weigh more extra money toward the market. I’m attacking both sides of my personal balance sheet, and that works for me.
One thing you also have to take into consideration is how much property value goes up in the matter of 30 years. I bought my house 8 years ago for 160k and refinanced to a low amount of years and when it appraised it was worth 265k so that’s a 100k profit.
Invest, invest, and more investing. Refi to 2.5% and invest. That balance will get smaller with inflation and at a rate of 2.5% you're better off with dividend paying stocks and index funds.
There's definitely a difference between 'on-paper' facts and real life (I liked your outro). One becomes less employable as they get older, so is nice to be mortgage free (esp in 60's and later). I liked your 30 year comparison - but I'm sure you have many 40's, 50's that listen to you; may be difficult to start in that age range (?).. Always appreciate your info, one of my favs, learned and applying a lot of it. Keep it up.
TBH, paying off a mortgage is technically also an investment. It may not seem like it but you are investing in the residential housing market for your location. If you paid off a $800k mortgage for example, you would hope that your property appreciates, which it usually does, but it can crash from time to time. Either way, it depends on the market value so it's an investment either way. It's more flexible to invest in the stock market since your money is more liquid and can be sold/withdraw when ever. With a property paid off, sure, you can take out a HELOC but you're not going to realize the appreciation of your property until you've sold it. It's better to pay off enough of your mortgage so that you don't have to deal with PMI and try to get the lowest interest rate possible. If anything a 15-year mortgage is the better option if you want to pay it off.
no. Buying a place is technical an investment. The purse supports the local housing market. Paying down your mortgage on the property quickly than you need to is not an 'investment'. The rate at which you pay down your debt has no bearing on local housing prices. It is best to pay off high interest debt before investing such as credit cards over 20%. A mortgage at 1.45% or whatever, pay that thing off as slow as you possibly can. If rates go up you can almost pay down quicker later or lump sum pay with the great returns you got in the last years investing in other things.
@@RainCity3rd I don't agree with what you've said so to me your statement is incorrect too. It is an investment. However my point is that investing in the market is better. I don't see the point of your comment.
Difference is you are leveraged. Thus you have an opportunity invest with your money AND be in the real estate market. Your house appreciates and depreciates regardless of you loan amount.
All thanks to Janet foreign exchange for helping me to trade my $15,000 into Bitcoin and I was credited with the sum of $58,000 after seven working days of my trade with her now I’m mortgage debt free I can settle my bills without even touching my paycheck I’m so happy with Bitcoin life is easy 😊
yes while stocks are more intresting, i still go for an house. nothing beats the feeling of financial freedom. in my case working fulltime as long as i see fit and investing. now doing both (investing and house). but if i have to choose a house all the way.
If you overbought sure. If you bought something reasonable then no way. Why not drag out payments as long as possible at the historically low interest rates we have? Its not any more risk than paying all your cash into paying down your loan but not having free cash flow for life problems. At least stocks i can sell in 5 seconds if i need to and i have the same house regardless if its paid off or or own only 20%...
The "this or that" argument of "paying off" your mortgage is usually made by people who haven't looked at the numbers at all. Paying DOWN a lot makes a lot of sense at first, but not later down the road. If you download a simple mortgage calculator spreadsheet, you can put in all those numbers. I figured, for example, that if I put 50k in my house, it saves me 83k in interest. If I put in 70k, it saved me 105k in interest. If I put in 100k, it saves me 135k in interest. And every time I put more into it after that, it saves me less extra than in the beginning. What I suggest to people who want to be smart with finances, is that they do the math and establish when it's still worth it and when it stops being worth it. If you only have 100k left on your mortgage to pay off, that extra 50k you put in might only save you another 10-20k in interest. But if you put it in at the beginning, on a 400k mortgage, it could save you 80k in interest. It's a gradual thing, so the whole discussion of "paying it all off" or "not putting another extra dollar into the house" at all, is never nuanced enough. Same with stocks, of course, which is an even more complicated thing.
It would be interesting to see what the overall savings would be after 30 years. Meaning if you paid off your mortgage in 7.42 years and invest mortgage pmt + extra cash flow for the next 22.58 years. What is the overall savings vs paying mtg for 30 years and investing extra cash flow consistently for 30 years.
you cant map that far into the future as we don't know the most important variables being inflation, house appreciation and investment returns. You could look at past results of course but they don't really predict the future. What we do know is we have historically low interest rates so its makes for very easy math, you generally end up with far more if you invest vs. paying of house asap. With interest rates so low you'd have to be terrible at investing (and totally some people are!) to lose. Sure if you buy far more than you can afford or buy multiple investments leveraged of the capital gains of the first being in such an over leveraged position you are taking on a lot of risk but if you just buy something reasonable that you and afford and then pay it off as slowly as possible and invest your cash flow its not very risky at all. The slight increase in risk is offset by having a far more liquid position should you have some life event where you need to access cash. Investments are far more liquid than cash locked in having paid down a mortgage.
California real estate, 60% increase in value in 5 years. We only pay property tax and insurance. In our neighborhood that is a $4000.00 a month discount over rent. That is $48k after tax a year we can spend on anything.
Not having debt is absolutely a huge weight off your shoulders, but in this era of MMT it makes a lot of sense to take on debt and let it get inflated away. I don't like it, but that's where we are.
I'm hedging my bets. I have knocked 14 years off my 30 year loan started in March 2021 and also invested the equivalent of half of that into different stocks.
Marko ... great video. I retired early (70 degrees in Florida today) at 62 with two full retirements plus SS for my wife and I. We have a mortgage which is very affordable with our current financial situation. I could pay off my mortgage ... but, at this point in my life I just can't see that the floor of my home will feel anymore comfortable if I owned it outright. On the other hand, my current thinking is ... CASH IS KING. Over the past few years I've been skimming off earnings from my 401k and stashing it into savings, because ... THESE ARE TROUBLED TIMES. I sure don't fault anyone for taking a different course, but this seems to be working for me. Marko, thanks for these videos ... you're making a new generation of educated consumers!
THANK YOU MARKO. I beleive that paying off your house is the best thing that you can do for yourself in life. There is no better feeling than standing in your back yard, jumping up and down on the lawn, looking up and saying: "I own this house and have no monthly mortgage payments. Maybe now I don't need to work this lousy job any more, it's no longer the end of the world is the company get's rid of me. Maybe I can retire early, maybe I can pay cash for a new car ....... having a nice hunk of change left over each month to do what you want with, many good possibilities, possibly live longer and stress free plus a better outlook towards life. THANKS MARKO, I love your RUclips channel. -:)))))))
but you still have taxes and rules so its not any different. Meanwhile investing means i have the same house but i can retire at 40 and you at 60 haha. I wont actually retire at 40 though as i like my job though.
Great video Marco. After watching your video, I did a little calculation. Since I just refinanced my home, my loan will finish in 2050. I am 37 so by that time I will be 67. That scared the crap out of me. Even though technically I can invest and keep fingers crossed that my investments will grow, thinking that I will absolutely have to work by that age and keep a good-paying job to ensure monthly payments is scary. Not that I don't want to work but life happens, what if I lose my ability to work, even the mere thought that I will still be paying off the mortgage by the time I want to retires just leaves bad taste in my mouth. So I checked, what if I throw an extra 2K on my mortgage every month since my wife just got a job and she earns about 2.5k per month, and the result blew my mind! I will be able to pay off my mortgage in just 10 years and by 2030 I will own the house! That's a Holy Sheet moment. That will be so sweet and will give us so much peace of mind. All this time I am maxing out my 401K and Roth and my wife is also doing 10% in 401K since her company does match. I am sure we will lose money had we invested that 2K into stocks or mutual funds for 10 years but for us, the peace of mind with a paid-off home is a much better trade-off. Once the mortgage is paid off, we will double down on the investments. I am sure we will be able to save enough till we want to retire in another 15-20 years but at least our house will be paid off and there won't be any debt. Even if I lose my job or I want to retire early and want to just flip burgers, or drive Uber or deliver pizzas to put food on the table or try a hobby to make money, I am fine, at least I don't have to slave myself just because I will lose my house if I don't have a good-paying job.
Marko does a good job discussing all of the pros and cons. As for me, I'm on the verge of paying off my mortgage next month. (I'm so excited!) The factor that persuades me the most: My home has increased in value by roughly 50% to 70% so even though I'll be "cash poor" with "all my worth in my walls" -- it's been quite an investment compared to something like stocks. Thanks for the video!
Bought my house in 2016 and at this time I have $45.5k left on it before it's paid off. If it wasn't for my wife needing a car (no fault of hers) car accident, it would've been paid off within 2 weeks. Once paid off, we will max out both our 401K's and Roth IRA's and look into getting a rental property sometime next year!
I just turned 55 and I feel like it's important to pay down my mortgage, (within reason) for the sake of my kids. My house is now worth way more than what I owe, but if I died, they might not be able to afford to finish paying for it, who knows? It would just be easier if it were paid off or at least down. So my solution was to first, refinance at the lower interest rate of 1.99%, and instead of the 26 years I had left on the original refinance, it is now at 15 years. Second, I think I should pay SOME extra on the house, AND some in investments.
So one thing that is missing is in blue collar markets, older, smaller 2 & 3 bedroom houses rented like clockwork in the Great Recession. In fact, here in SE Texas, we saw rent prices stay flat in that market, with low vacancy. Meaning in effect, the rents went up (though not nominally). People downsizes into that bottom home rental market, only thing lower is renting an apartment. Not advocating leveraging to the hilt, but I thought it would be worth mentioning that the smaller, lower cost properties usually have less risk. The downside is the number of them you have to have to generate the same nominal return (in regard to revenue itself).
Marko: Make sense? Me: Yes 😁 Thanks for breaking this down. I'm hoping to make strides in investing and paying down my mortgage this year so this info is VERY helpful 💯
Mark Noldy , I have lived through 1987 crush, 1990-91 recession, 2000 - 01 Nasdaq crush, 2008 crush . I have lost so much money of my 401k in 2000 , by the time I made up the money , next crush happened. Pay off your mortgage first , and don't listen to any experts .
Awesome video, as always. One question / thought on the exercise. You touched briefly on the tax deduction implication on the mortgage side, but how do you factor in taxes on the invest side? Those 7% gains are not tax free (assuming you're already maxed on IRA, 401k, Roth, etc). Just curious how you'd factor it in. Keep up the good work and positive outlook!
Start investing and maxing out the contributions to your ROTH IRA. You pay taxes on the money from your income before you put it into this account and it is tax free when you pull it out. Most people do 401k, but I’ve noticed that the company match is slowing trending down. The company I work for matches 10% of what you put in up to 5% of your income. That’s not much. The 401k is the next thing you should invest into after maxing your ROTH. Most people put money into the 401k and not the ROTH. Assume your 401k balance is 25% less when you retire because this is what you will likely pay in taxes withdrawing the money. Any kind of passive income such as a rental is a great way to make sure you can pay for your next rental. Most people have their retirement plan set up but have no idea how they are going to go about living with any kind of income when the time comes. Rentals are the way to do that.
I made this same argument in my real estate finance class. The professor showed me why I was wrong. The correct answer is to play out the two scenarios, use the IRR formula, compare the change in balance at the investing opportunity cost. The scenario I’m referencing is a lump sum at a point in time of the loan schedule, and not annuity payments until the loan is paid off.
at historically low interest rates it makes no financial sense to pay off the house quicker than you need to. Anyone can invest enough to do better in the market. you can beat the returns you need in yields even. Its not like you have to invest in sketchy crypto with massive volatility, you can buy huge safe blue chips stocks or etfs if and only pick a few stocks to pay with for a small portion of ones total portfolio...
@@RainCity3rd Interest rate is not equivalent to market returns. If I paid an extra $1,000 this year, that’s $1,000 less that is subject to interest for the duration of the loan. Meaning more of my mortgage payment goes to principal than interest.
@@codyolson6893 no kidding... But you understand that a historical low interest rate means the cost to borrow is extremely low and thus the returns one needs to break even or beat to be better off having invested that $1000 vs. reducing your principal by $1000 is very easy and thus can be done with minimal risk. If interest rates were say 10% then sure that's a lot harder to beat without just taking on more and more risk and the better option may well be to pay off ones mortgage asap. At today's rates paying quicker is absolutely not the more efficient financial decision.
First, let me say this is probably the most fair video I’ve seen on this topic. I would have just asked your finance professor why 90% of self-made millionaires chose the pay the mortgage off early option? 🤣
Great vid. 👍 There can also be a balance of paying ones home off sooner and investing at the same time. By starting to invest with smaller amounts of cash to learn ones way through it...
Overall and Most valuable advice is to invest in assets. ETFs and real estate is the reason for my robust portfolio and investment size, I make over €270k after compounding profits quarterly. My goal is to build a solid financial statement before 60
I agree with you, One good way to generate high income is by investing in certified businesses with a track record of success and you will surely see your profits in good time.
The best source of income, is multiple sources of income. Sometimes we need to get our minds off negativity and just motivate ourselves, stop giving excuses because you will end up not achieving your dreams, take a chance and try something new.
My question is how can one invest in stock market effectively with great turnouts? How realistic is that amount as profit? I have been trading since 2015 and haven't made that much
@@rodeotime5059 Trading stock options is quite complicated, that is why you don't invest without background knowledge. I trade using signals from *Amanda Katherine Leff* because are projections are always accurate and she generates proper returns.
One thing that wasn't taken into account is the amortization schedule associated with a home. When you look at how much interest you're paying in the first 5 years it becomes a no brainer (imho) to pay off your home.
I think it's hard to make a perfect example. I keep a reasonably portion of my money in a regular bank account, because if bad things happen I can make them go away. How much money I need is proportional to the risk to my personal finances. So putting money in the mortgage and reducing that financial obligation also gives more flexibility with my funds. I have a 4 year plan on my remaining mortgage, but I'm buying index funds, stocks, remodeling and keeping a large amount of savings all at once. How you shift that balance around isn't easy to represent in math. Over 7+ years expecting a linear anything is very optimistic. There is a balance and a wealth point for everything. But there's no point where you'd take out a new mortgage to put that money into the market. You wouldn't borrow a million and invest it, even if the interest rates were low. That'd be mental and a massive voulnerability.
It’s even more worth it to invest vs pay down when you factor in inflation. Inflation alone makes it worth it to wait to pay off the mortgage. You can either use the value of $1,000 today to pay off the mortgage or the value of $1,000 20 years from now.
Long ago, they said pay all your debts, have an emergency fund, maximize your retirement contributions, and invest in stocks what you can afford to lose…been there, done those. Riding the waves of economy all along…no regrets.
One thing people seem to completely forget most importantly is that the 'amount' you save for retirement, by the time of retirement will be worth 'less' than what the present value is today due to annual inflation/avg. That's why it's soooo important to get saving earlier and invest into 401k,b's roths etc.
This is great to see the difference broken down! It does require someone who is disciplined about investing (I need to step up my game on that myself). Now I'm really motivated to do just that. Thanks, Marko!👏
If 2008 and 2020 taught us anything, it's that it's nice to own your home free and clear. I say Invest 15-20% of your income for retirement. Use whatever you have above and beyond that to pay off your mortgage early. Then you can start to have some real fun.
Great video. It confirmed what I wanted to do...pay my house off early. LOL Funny thing is, I had watch GR before I watched this video and it didn't make much sense to me being that my window of time would be the next 13-20 months. That isnt a long time to invest and see a huge amount of profit. Im just going to pay it off, free up that money and then invest from that point.
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@marko-whiteboard finance what about business mortgage of 30 years at interest rate of 4.5%?Does this also needs to be paid off or invest that extra money? Thank you for amazing video
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That little story at the end seems an awful lot like meet Kevin, the guy with 20 homes who thinks they’re all gonna pay him!!! Enjoy you sharing your knowledge homie!!!
I'm the Jim of March 2020. My wife & I said countless times last year how happy we were that we paid our house off in 6 years. I lost 70% of my income in 2020 but we were never financially stressed.
I follow and love your videos. sadly, it's been a while since i visited it has been a very rough year... i am experiencing one of the most challenging phases of my life... Lost a fortune lnvesting in emerging companies. Hopeful, for a turnaround.
Investing so much in emerging companies is a horrible decision. BTW, I commend Gary's trading pattern too. Different perspective, different technique
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I don't care about the math I just don't want to have a mortgage....
nothing wrong with that
I have the same mentality on that, it doesn't feel good. Especially as a German, in our language debt is the same word as guilt.
Yes I agree I’m looking into buying house and paying it off as fast I can 5 years preferably I like peace of mind
It really comes down to your age and how near is your retirement . You still own taxes on it
Totally Agree, I don’t want to be paying a mortgage when I am an old man , god willing if I make it 😁
It is best to balance paying off your mortgage WITH investing. Consider the mortgage being linked to your overall portfolio.
🎯
Agreed. Having 100% equity in your home allows you to be more flexible with cash flow and creates opportunity to invest more than you would have being tied down to a mortgage.
100% I do my 5% work 401k match max out Roth $6k and anything extra on that I throw at the principle that way I’m getting both of benefits still then once that mortgage is gone going bananas on my investments
Right on!! I view it as a saving account.
I’m 54 and paid off my house in my late 30’s and have never looked back. The freedom you buy yourself is priceless. By doing that I was able to maximize my 401k which is pretax money I also live the way I want to live. I’v seen the economy go up and down and it doesn’t matter to me I know I have a place to live, the bank can never come knocking at my door.
Till you can’t pay those taxes
@@AN-jz3px I would think anyone smart enough to pay off a mortgage, already knows taxes are eternal & is ready for it.
@@smackroscoe true but some people don’t get that (Athletes did example)
@@AN-jz3px Well if you cannot pay the taxes you certainly wouldn't be able to pay the mortgage!
@@ericsloan858 all’s well that ends well. Tax payments have a long time to be paid
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I say pay off the mortgage. Being debt free is like walking on clouds. You become more bold in making career and investment decisions because you are not scared about paying mortgage.
For reals. We make around $10,000 a month and only have our $1500 mortgage. We went from working 5 days a week, down to two days a week and the feeling of freedom is amazinv.
I agree it's time to stop living the American dream digging a hole of debt... I would much rather pay down my house.
But the numbers literally tells us it is financially better to invest...
@@Yugiboii numbers don't take into account life getting in the way, and it will
@@mr8610 yes but that is why we have an emergency fund for when life comes knocking on the door
Great explanation. At 49, I’m only making extra payments to ensure the house is paid off at 62. This affords me cash to invest monthly. Age does influence your stress and risk tolerance.
If you pay off your mortgage, instead of investing, you don't shit your pants anytime the Dow Jones drops 600 or 700 points.
Long term it really dont matter if it drops
@@noname-dy3fh long-term we're all dead.
@@Allan_A You could say that same argument for not paying of the mortgage early. We are all going to die anyway.
if you have any clue how to invest when the market dumps you buy a ton more at a huge discount and know a few years of your retirement date. Dow jones dumping doesn't put you out of a job.... so really who cares.
People don't realize, how stress less life is , knowing the house is mine . And having the extra money is huge.
I'd love to see an updated version of this video with interest rates having increased along with such high inflation, all while the market is dipping. Thoughts?
Excellent video, by a great speaker. I'm in the same boat, I can pay off my house tomorrow if I wanted to, but currently have it invested. The benefit of owning your own home outright is that you feel more confident that you can quit your job and survive on "day-to-day" cash that you're making and not feel pressure over paying off a mortgage. Plus, the annual 1st of the month making a mortgage payment is always depressing. I'm leaning toward paying off the house.
Glad I stayed until the end. Good stuff.
One thing to remember...because I actually paid off my 30 year mortgage in 10 years....is that you still have to pay INSURANCE & PROPERTY TAXES....so want to ensure you save that up each year as you lose the comfort of an ESCROW account. Additionally need to save for maintenance & repairs....so you never really get totally out of debt, but at least don't have send the mortgage company a check every month! :)
Well said. Because you never actually own your home. The city does, lol. 😆
Great video as always. I’m blessed enough to be able to be doing both (brokerage and extra mortgage payments) in addition to our retirement contributions. I’m paying extra mostly into the mortgage right now. As soon as the market takes a nice dip, I’ll weigh more extra money toward the market. I’m attacking both sides of my personal balance sheet, and that works for me.
Paying down your mortgage or investing? But Marko, why not max out your credit card at Gucci instead?!?
Has mortgage but looks fly af
Hey! Leave Gucci out of it. They have some really nice stuff! 😉
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One thing you also have to take into consideration is how much property value goes up in the matter of 30 years. I bought my house 8 years ago for 160k and refinanced to a low amount of years and when it appraised it was worth 265k so that’s a 100k profit.
Invest, invest, and more investing. Refi to 2.5% and invest. That balance will get smaller with inflation and at a rate of 2.5% you're better off with dividend paying stocks and index funds.
Numbers will say invest
My heart will always say no debt
"The borower is a slave to the lender." Dave Ramsey. -:)
There is an emotional component to debt and a lot of people don't account for it
AND MARCO OUT HERE PUTTIN ON DAT TRAP MUZIK @11:53. Aight now, your my favorite RUclips financial advisor brah.
There's definitely a difference between 'on-paper' facts and real life (I liked your outro). One becomes less employable as they get older, so is nice to be mortgage free (esp in 60's and later). I liked your 30 year comparison - but I'm sure you have many 40's, 50's that listen to you; may be difficult to start in that age range (?).. Always appreciate your info, one of my favs, learned and applying a lot of it. Keep it up.
Great video, I’ve been screaming this for years. Through investments I was able to pay my house off in 6 years.
How did you manage to do that?
The last drawing summarizes the whole video. Great video!!!!!
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I like to have peace of mind specially in time like this but each to their own.
I liked the “Jim” example and it makes sense to pay off the mortgage, save and wait for the right opportunity to invest.
TBH, paying off a mortgage is technically also an investment. It may not seem like it but you are investing in the residential housing market for your location. If you paid off a $800k mortgage for example, you would hope that your property appreciates, which it usually does, but it can crash from time to time. Either way, it depends on the market value so it's an investment either way. It's more flexible to invest in the stock market since your money is more liquid and can be sold/withdraw when ever. With a property paid off, sure, you can take out a HELOC but you're not going to realize the appreciation of your property until you've sold it. It's better to pay off enough of your mortgage so that you don't have to deal with PMI and try to get the lowest interest rate possible. If anything a 15-year mortgage is the better option if you want to pay it off.
no.
Buying a place is technical an investment. The purse supports the local housing market. Paying down your mortgage on the property quickly than you need to is not an 'investment'. The rate at which you pay down your debt has no bearing on local housing prices. It is best to pay off high interest debt before investing such as credit cards over 20%. A mortgage at 1.45% or whatever, pay that thing off as slow as you possibly can. If rates go up you can almost pay down quicker later or lump sum pay with the great returns you got in the last years investing in other things.
@@RainCity3rd okay...so?
@@BN99239 so... your statement was incorrect. Did you have a question?
@@RainCity3rd I don't agree with what you've said so to me your statement is incorrect too. It is an investment. However my point is that investing in the market is better. I don't see the point of your comment.
Difference is you are leveraged. Thus you have an opportunity invest with your money AND be in the real estate market. Your house appreciates and depreciates regardless of you loan amount.
You're extremely charismatic and perfect for these videos. Thanks for the information- it's well organized and presented- and informative!
All thanks to Janet foreign exchange for helping me to trade my $15,000 into Bitcoin and I was credited with the sum of $58,000 after seven working days of my trade with her now I’m mortgage debt free I can settle my bills without even touching my paycheck I’m so happy with Bitcoin life is easy 😊
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That last drawing got you a subb 😂
Look at the turtle neck! Bringing the Oldies back, lookin good Marco. 👍🏼
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yes while stocks are more intresting, i still go for an house. nothing beats the feeling of financial freedom. in my case working fulltime as long as i see fit and investing. now doing both (investing and house). but if i have to choose a house all the way.
Could always find a middle ground and do both (£1,250pm towards mortgage overpayments and £1,250 towards investing) 😇
agreed!
Thats what Dave Ramsey recommends. 15% on investing and the rest hammer the home loan.
If you overbought sure. If you bought something reasonable then no way. Why not drag out payments as long as possible at the historically low interest rates we have? Its not any more risk than paying all your cash into paying down your loan but not having free cash flow for life problems. At least stocks i can sell in 5 seconds if i need to and i have the same house regardless if its paid off or or own only 20%...
The "this or that" argument of "paying off" your mortgage is usually made by people who haven't looked at the numbers at all. Paying DOWN a lot makes a lot of sense at first, but not later down the road. If you download a simple mortgage calculator spreadsheet, you can put in all those numbers.
I figured, for example, that if I put 50k in my house, it saves me 83k in interest. If I put in 70k, it saved me 105k in interest. If I put in 100k, it saves me 135k in interest. And every time I put more into it after that, it saves me less extra than in the beginning.
What I suggest to people who want to be smart with finances, is that they do the math and establish when it's still worth it and when it stops being worth it. If you only have 100k left on your mortgage to pay off, that extra 50k you put in might only save you another 10-20k in interest. But if you put it in at the beginning, on a 400k mortgage, it could save you 80k in interest. It's a gradual thing, so the whole discussion of "paying it all off" or "not putting another extra dollar into the house" at all, is never nuanced enough.
Same with stocks, of course, which is an even more complicated thing.
It would be interesting to see what the overall savings would be after 30 years. Meaning if you paid off your mortgage in 7.42 years and invest mortgage pmt + extra cash flow for the next 22.58 years. What is the overall savings vs paying mtg for 30 years and investing extra cash flow consistently for 30 years.
you cant map that far into the future as we don't know the most important variables being inflation, house appreciation and investment returns. You could look at past results of course but they don't really predict the future. What we do know is we have historically low interest rates so its makes for very easy math, you generally end up with far more if you invest vs. paying of house asap. With interest rates so low you'd have to be terrible at investing (and totally some people are!) to lose. Sure if you buy far more than you can afford or buy multiple investments leveraged of the capital gains of the first being in such an over leveraged position you are taking on a lot of risk but if you just buy something reasonable that you and afford and then pay it off as slowly as possible and invest your cash flow its not very risky at all. The slight increase in risk is offset by having a far more liquid position should you have some life event where you need to access cash. Investments are far more liquid than cash locked in having paid down a mortgage.
Great video man. Now a video on how to balance paying into both at the same time :)
“Unless you’re Enron” .... quality line 😂.
Bruh, that example you gave at the end of the video is golden. lololol. It boggles my mind why so many people do not see this.
Be like Jim, paying the mortgage off first is a sure thing, zero risk.
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The risk of paying off your house directly to the lender is opportunity cost
California real estate, 60% increase in value in 5 years. We only pay property tax and insurance. In our neighborhood that is a $4000.00 a month discount over rent. That is $48k after tax a year we can spend on anything.
Marko- Your cartoon is spot on. I personally went through the unhappy Jim scenario and it is frightening when a divorce or a global crisis happens.
Not having debt is absolutely a huge weight off your shoulders, but in this era of MMT it makes a lot of sense to take on debt and let it get inflated away. I don't like it, but that's where we are.
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I'm hedging my bets. I have knocked 14 years off my 30 year loan started in March 2021 and also invested the equivalent of half of that into different stocks.
Marko ... great video. I retired early (70 degrees in Florida today) at 62 with two full retirements plus SS for my wife and I. We have a mortgage which is very affordable with our current financial situation. I could pay off my mortgage ... but, at this point in my life I just can't see that the floor of my home will feel anymore comfortable if I owned it outright. On the other hand, my current thinking is ... CASH IS KING.
Over the past few years I've been skimming off earnings from my 401k and stashing it into savings, because ... THESE ARE TROUBLED TIMES. I sure don't fault anyone for taking a different course, but this seems to be working for me. Marko, thanks for these videos ... you're making a new generation of educated consumers!
Thank you sir, enjoy the weather :)
I do both 15% into retirement maxxed out the 401k 15 year mortgage paid off 48 extra months in the last 16 down to 9 years and counting.
It's worth noting you can enjoy the benefits of both if that fits into your plan.
Absolutely!
THANK YOU MARKO. I beleive that paying off your house is the best thing that you can do for yourself in life. There is no better feeling than standing in your back yard, jumping up and down on the lawn, looking up and saying: "I own this house and have no monthly mortgage payments. Maybe now I don't need to work this lousy job any more, it's no longer the end of the world is the company get's rid of me. Maybe I can retire early, maybe I can pay cash for a new car ....... having a nice hunk of change left over each month to do what you want with, many good possibilities, possibly live longer and stress free plus a better outlook towards life. THANKS MARKO, I love your RUclips channel. -:)))))))
Thanks Michael! Not owing anyone anything is priceless
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but you still have taxes and rules so its not any different. Meanwhile investing means i have the same house but i can retire at 40 and you at 60 haha. I wont actually retire at 40 though as i like my job though.
Great video Marco. After watching your video, I did a little calculation. Since I just refinanced my home, my loan will finish in 2050. I am 37 so by that time I will be 67. That scared the crap out of me. Even though technically I can invest and keep fingers crossed that my investments will grow, thinking that I will absolutely have to work by that age and keep a good-paying job to ensure monthly payments is scary. Not that I don't want to work but life happens, what if I lose my ability to work, even the mere thought that I will still be paying off the mortgage by the time I want to retires just leaves bad taste in my mouth.
So I checked, what if I throw an extra 2K on my mortgage every month since my wife just got a job and she earns about 2.5k per month, and the result blew my mind! I will be able to pay off my mortgage in just 10 years and by 2030 I will own the house! That's a Holy Sheet moment. That will be so sweet and will give us so much peace of mind. All this time I am maxing out my 401K and Roth and my wife is also doing 10% in 401K since her company does match. I am sure we will lose money had we invested that 2K into stocks or mutual funds for 10 years but for us, the peace of mind with a paid-off home is a much better trade-off. Once the mortgage is paid off, we will double down on the investments. I am sure we will be able to save enough till we want to retire in another 15-20 years but at least our house will be paid off and there won't be any debt.
Even if I lose my job or I want to retire early and want to just flip burgers, or drive Uber or deliver pizzas to put food on the table or try a hobby to make money, I am fine, at least I don't have to slave myself just because I will lose my house if I don't have a good-paying job.
I am of the same age and same boat except I took a 15 year mortgage. I know I will lose some gains but a paid off loan at 52 vs 67 is a big deal
10:30 is my favorite part and why I love all these videos aside from the amazing, easy to digest financial advice!!
Thank you sir!
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Marko does a good job discussing all of the pros and cons. As for me, I'm on the verge of paying off my mortgage next month. (I'm so excited!) The factor that persuades me the most: My home has increased in value by roughly 50% to 70% so even though I'll be "cash poor" with "all my worth in my walls" -- it's been quite an investment compared to something like stocks. Thanks for the video!
The home would have appreciated in value whether you paid it off early or not, so the factor that persuades you the most doesn't really matter at all.
Great video! How about doing both but less aggressively?
Bought my house in 2016 and at this time I have $45.5k left on it before it's paid off. If it wasn't for my wife needing a car (no fault of hers) car accident, it would've been paid off within 2 weeks. Once paid off, we will max out both our 401K's and Roth IRA's and look into getting a rental property sometime next year!
I love this channel. He explain all 4 examples.
I decided to do both, 40% to house 60% to invest
Same here
@@macster1457 I think they mean the extra amount they put towards the mortgage and investing. Not 100% of their monthly income
Yeah, thats what we did. 50/50.
that is what I am planning to do with my 15 year mortgage
I just turned 55 and I feel like it's important to pay down my mortgage, (within reason) for the sake of my kids. My house is now worth way more than what I owe, but if I died, they might not be able to afford to finish paying for it, who knows? It would just be easier if it were paid off or at least down. So my solution was to first, refinance at the lower interest rate of 1.99%, and instead of the 26 years I had left on the original refinance, it is now at 15 years. Second, I think I should pay SOME extra on the house, AND some in investments.
For the algorithm
Respect
Another champion video
+1 for correctly using risk "averse" and not "adverse"
So one thing that is missing is in blue collar markets, older, smaller 2 & 3 bedroom houses rented like clockwork in the Great Recession. In fact, here in SE Texas, we saw rent prices stay flat in that market, with low vacancy. Meaning in effect, the rents went up (though not nominally). People downsizes into that bottom home rental market, only thing lower is renting an apartment.
Not advocating leveraging to the hilt, but I thought it would be worth mentioning that the smaller, lower cost properties usually have less risk. The downside is the number of them you have to have to generate the same nominal return (in regard to revenue itself).
Marko: Make sense?
Me: Yes 😁
Thanks for breaking this down. I'm hoping to make strides in investing and paying down my mortgage this year so this info is VERY helpful 💯
I like your advice and practical example at the end of the video.
More great content. My wife and I are going through this very discussion now!
Thank you sir
Mark Noldy , I have lived through 1987 crush, 1990-91 recession, 2000 - 01 Nasdaq crush, 2008 crush . I have lost so much money of my 401k in 2000 , by the time I made up the money , next crush happened. Pay off your mortgage first , and don't listen to any experts .
@@romanromanowski9038 90% chance what we'll keep doing. Even though rate is low, home value should go up.
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Once again thank you Marko. I like the end part. Money is brutal.
Awesome video, as always. One question / thought on the exercise. You touched briefly on the tax deduction implication on the mortgage side, but how do you factor in taxes on the invest side? Those 7% gains are not tax free (assuming you're already maxed on IRA, 401k, Roth, etc). Just curious how you'd factor it in. Keep up the good work and positive outlook!
Start investing and maxing out the contributions to your ROTH IRA. You pay taxes on the money from your income before you put it into this account and it is tax free when you pull it out. Most people do 401k, but I’ve noticed that the company match is slowing trending down. The company I work for matches 10% of what you put in up to 5% of your income. That’s not much.
The 401k is the next thing you should invest into after maxing your ROTH. Most people put money into the 401k and not the ROTH. Assume your 401k balance is 25% less when you retire because this is what you will likely pay in taxes withdrawing the money.
Any kind of passive income such as a rental is a great way to make sure you can pay for your next rental. Most people have their retirement plan set up but have no idea how they are going to go about living with any kind of income when the time comes. Rentals are the way to do that.
Congrats on 500K subs Sue 😀
I made this same argument in my real estate finance class. The professor showed me why I was wrong. The correct answer is to play out the two scenarios, use the IRR formula, compare the change in balance at the investing opportunity cost. The scenario I’m referencing is a lump sum at a point in time of the loan schedule, and not annuity payments until the loan is paid off.
at historically low interest rates it makes no financial sense to pay off the house quicker than you need to. Anyone can invest enough to do better in the market. you can beat the returns you need in yields even. Its not like you have to invest in sketchy crypto with massive volatility, you can buy huge safe blue chips stocks or etfs if and only pick a few stocks to pay with for a small portion of ones total portfolio...
@@RainCity3rd Interest rate is not equivalent to market returns. If I paid an extra $1,000 this year, that’s $1,000 less that is subject to interest for the duration of the loan. Meaning more of my mortgage payment goes to principal than interest.
@@codyolson6893 no kidding... But you understand that a historical low interest rate means the cost to borrow is extremely low and thus the returns one needs to break even or beat to be better off having invested that $1000 vs. reducing your principal by $1000 is very easy and thus can be done with minimal risk. If interest rates were say 10% then sure that's a lot harder to beat without just taking on more and more risk and the better option may well be to pay off ones mortgage asap. At today's rates paying quicker is absolutely not the more efficient financial decision.
First, let me say this is probably the most fair video I’ve seen on this topic.
I would have just asked your finance professor why 90% of self-made millionaires chose the pay the mortgage off early option? 🤣
Great said Marko
thank you mr. finance :)
Excellent timing, was just thinking about this!
Great vid. 👍 There can also be a balance of paying ones home off sooner and investing at the same time. By starting to invest with smaller amounts of cash to learn ones way through it...
Thank you for keeping the video clean.
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Great video. Well done on the financial breakdown and personal philosophy perspectives.
The last part with Jim was hilarious and useful.
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Marko, another value packed video, thanks again for great content!... 😉👍
Overall and Most valuable advice is to invest in assets. ETFs and real estate is the reason for my robust portfolio and investment size, I make over €270k after compounding profits quarterly. My goal is to build a solid financial statement before 60
I agree with you, One good way to generate high income is by investing in certified businesses with a track record of success and you will surely see your profits in good time.
The best source of income, is multiple sources of income. Sometimes we need to get our minds off negativity and just motivate ourselves, stop giving excuses because you will end up not achieving your dreams, take a chance and try something new.
Where can I learn how to trade stock options? I’ve been watching videos and still confused.
My question is how can one invest in stock market effectively with great turnouts? How realistic is that amount as profit? I have been trading since 2015 and haven't made that much
@@rodeotime5059 Trading stock options is quite complicated, that is why you don't invest without background knowledge. I trade using signals from *Amanda Katherine Leff* because are projections are always accurate and she generates proper returns.
"I really wish I had never paid off my home!" I think that peace of mind is the best. Just being able to really have that cash flow afterwards! 🥰
Good Video, Investing is the key 💯
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One thing that wasn't taken into account is the amortization schedule associated with a home. When you look at how much interest you're paying in the first 5 years it becomes a no brainer (imho) to pay off your home.
Marko dropping gems as always
I think it's hard to make a perfect example. I keep a reasonably portion of my money in a regular bank account, because if bad things happen I can make them go away. How much money I need is proportional to the risk to my personal finances. So putting money in the mortgage and reducing that financial obligation also gives more flexibility with my funds. I have a 4 year plan on my remaining mortgage, but I'm buying index funds, stocks, remodeling and keeping a large amount of savings all at once. How you shift that balance around isn't easy to represent in math. Over 7+ years expecting a linear anything is very optimistic. There is a balance and a wealth point for everything.
But there's no point where you'd take out a new mortgage to put that money into the market. You wouldn't borrow a million and invest it, even if the interest rates were low. That'd be mental and a massive voulnerability.
It’s even more worth it to invest vs pay down when you factor in inflation. Inflation alone makes it worth it to wait to pay off the mortgage. You can either use the value of $1,000 today to pay off the mortgage or the value of $1,000 20 years from now.
I'm honestly so torn between the 2 options.... This seems the most convincing to me to keep a mortgage.... But idk
TVM is huge. When thinking about the next 20-30 years and what to do now in order to be successful, tvm has to be a factor in the decision making.
A balanced argument. Thank you Marko.
Great video! Good information, well presented!
Thanks Doug!
Yes but don’t forget property taxes, insurance and maintenance expenses that come with the home ownership.
I do both with the extra. There's something to be said for being debt free. I enjoyed it for the 2 years before I bought my house. Very liberating
Short, concise, informative, simple, and great example in the end 😂 thanks for the great video
Marko, I really like how you have stayed consistent with your channel. Very informative to me over the years. Hard to find nowadays on youtube
Thanks Trevor I appreciate that
Long ago, they said pay all your debts, have an emergency fund, maximize your retirement contributions, and invest in stocks what you can afford to lose…been there, done those. Riding the waves of economy all along…no regrets.
Numbers don’t lie...unless you’re Enron. This is the second vid I’ve watched of yours and you have some bars son!
lol I'm the realest in the game. Only the second vid of mine? Those are rookie numbers son. Get those numbers up. :p
@@WhiteBoardFinance yessir, you the boss! Them viewer numbers gonna improve just like my financial stability from watching your content :)
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This is the best one yet!
I fricken love this guy
LOL! ty
"numbers don't lie unless you're Enron" That was gold!
One thing people seem to completely forget most importantly is that the 'amount' you save for retirement, by the time of retirement will be worth 'less' than what the present value is today due to annual inflation/avg. That's why it's soooo important to get saving earlier and invest into 401k,b's roths etc.
Hey Marko, Nice Sweater!! Thanks for the quality financial advice as well.
The last chapter of this video needs to be its own video. The full story of Jim and Oscar.
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This is great to see the difference broken down! It does require someone who is disciplined about investing (I need to step up my game on that myself). Now I'm really motivated to do just that. Thanks, Marko!👏
If 2008 and 2020 taught us anything, it's that it's nice to own your home free and clear. I say Invest 15-20% of your income for retirement. Use whatever you have above and beyond that to pay off your mortgage early. Then you can start to have some real fun.
Peace of mind definitely is priceless
@@WhiteBoardFinance Truth!!!
It also taught us not to sell. I know so many people that sold stocks out of fear.
Very balanced and fair analysis. Thank you!
It makes sense to invest as long as your mortgage is complete by the time you retire. Don't have a mortgage at retirement!
Right!
Great video. It confirmed what I wanted to do...pay my house off early. LOL Funny thing is, I had watch GR before I watched this video and it didn't make much sense to me being that my window of time would be the next 13-20 months. That isnt a long time to invest and see a huge amount of profit. Im just going to pay it off, free up that money and then invest from that point.
Nice sweater
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Love it Marko! Great video!