🤔 Should I pay off my mortgage or invest?

Saturday,
September 9, 2023

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The week in review

• The U.S. economy added 187,000 jobs in August slightly more than in July. It was the third straight month with fewer than 200,000 jobs created, a sign that the labor market continues to cool.

• The ISM services PMI unexpectedly jumped in August. This marked the strongest growth in the services sector in six months, exceeding expectations with faster growth in business activity, new orders, employment, and inventories.

• Airlines Southwest (LUV), Alaska (ALK), and United (UAL) have all reported higher fuel costs this summer, with prices spiking around 30% between early July and Labor Day weekend. Fuel and labor are the biggest costs for airlines. The question is how much of these costs airlines were able to pass onto customers, as fares have fallen from last year’s levels.

For more economic news, visit On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Should I pay off my mortgage or invest?

If you are one of the millions of homeowners with a mortgage, you might be wondering whether it makes sense to pay off your home loan or invest. If you have set up a budget and are fortunate enough to have a bit of extra money each month, it's only natural to wonder how to best put it to use. Here's a look at some of the pros and cons.

The case for investing

For many people, it can make the most financial sense to invest rather than paying extra to a mortgage. This is especially true if you have access to a tax-advantaged account like an IRA or 401(k), or a mortgage with a relatively low interest rate.

Think of it this way: Paying down your mortgage is essentially "earning" whatever interest rate your mortgage is at — and you may be able to do much better in the stock market or with other investments. Paying down your mortgage also means that the money you put toward the principal is difficult to get back out if you end up needing it later.

The case for paying down your mortgage

There's something truly satisfying about being completely "debt-free." Owing nothing may give you peace of mind that's more meaningful than any incremental financial savings. Other reasons to consider paying down your mortgage might be a very high interest rate on your home loan, or if paying your mortgage down can help you get rid of PMI (private mortgage insurance).

Looking to learn more about investing? Check out SoFi Invest and learn about investing basics for beginners.

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