by Miss Sophia
PennyStockHaven’s guest author
Paying extra on your mortgage than what you can actually afford is no doubt good particularly when you have sufficient money for it. Paying off the home loan as early as possible will give you relief from the burden of payments and provide you a security that the house belongs to you. You may calculate a mortgage with the help of a mortgage calculator and find out the exact amount you can afford to pay on your home loan. Although, repaying the mortgage loan may seem to be appealing, you need to consider various things before doing so. As such, in some situations, it is better to invest in the stock market.
Continue with the mortgage loan
You may invest in the stock market with the money that you had kept to pay off the mortgage by continuing with the home loan. This way, you may earn a high yield with the stock market than the savings you will gain by repaying the mortgage. You need to know that there is no guarantee with the stock market. So, you must consider the probable risks of the market with the possible gains.
Rich in home equity and poor in cash
One major disadvantage of paying off the mortgage loan is that it can make you rich in home equity and poor in cash. So, if repaying the mortgage loan leaves you without sufficient money for emergency situations, then you may get into a difficult situation in case you lose your job or suffer from financial problem. Increasing cash from your home’s equity may seem to be tricky and time-consuming process than going to the bank and withdrawing the required money.
Develop an investment plan on daily basis
After you pay off the mortgage loan, you may use the money that you were using for the mortgage payments to invest in the stock market. For this, it will be better if you develop an investment plan on daily basis. You can forward the monthly mortgage payments to the stock market instead of setting up an automatic transfer from your checking account to a low-cost mutual fund. The dollar cost averaging (DCA) strategy enables you to collect more shares of the mutual fund when the stock market turns down and when it is high.
Long term investment
The stock market is a long-term investment where you invest your hard-earned bucks for a long period of time. If you can accept low risk, you should restrict your exposure to the stock market. If you recognize the innate instability of the stock market and are ready to accept the market declines, then you may invest in the stock market and grow your wealth with time.
By paying off your mortgage early, you will have more money to invest in the stock market. If you are expecting the long-term gains in the stock market despite the risks involved, you may continue to carry with the mortgage while you invest in the stock market.