Should you pay off your home and then invest?

By Sarah Megginson


Paying off your mortgage as soon as possible will give you massive peace of mind, not to mention the distinct advantage of being financially free. Paying off your own home is a massive achievement and with some strategic extra repayments, is an achievement you can knock over much sooner than your 30-year loan term.

However, when you’re working to pay down your mortgage, you may be wondering: when is the best time to invest? managing editor Sarah Megginson chats with Drew Evans, director of Caifu Property, to shed some light on many of the issues to do with this topic, and aim to answer the question once and for all: should you pay off your home and then invest? Or is it better to invest as soon as possible?

For a lot of people, the mindset around debt is that is should be paid off as quickly as possible, before taking on new investments ventures.

In addition to this money mindset, many people typically have a plan in place that results in them choosing between owning their own home or making an investment.

Drew believes its not only possible to do both at the same time, but it’s preferable, as it can get you a better financial result, in a more timely manner.

Which is best: pay off your home or start to invest with a PPOR mortgage?

In this video, Sarah Megginson and Drew Evans explore the notion that homeownership and investing become possible at the same time by effectively using your money.

This means manoeuvring into a position where your money is working as hard for you as possible – whilst also being careful not to overextend yourself financially, to the point where you’re living off two-minute noodles in order to meet your financial obligations.

One common mistakes that many people make in this regard is borrowing at maximum capacity. They go to the bank and obtain a loan that they may be able to afford from a bank’s perspective, but that might not necessarily be realistic for them to maintain.

With such a massive debt, they could be one massive emergency repair away from financial hardship. This is why its essential to have a clear plan at the beginning of your journey – regardles of whether you decide to pay down your mortgage before investing or not.

Determining your actual financial capacity will enables you to manage your debt better and evaluate future steps and plans. When dealing with debt, it all comes down to mentality (psychology) and attitude towards handling and tackling more debt.

It’s naive to assume that investing is not a risky business, however planning for the worst and hoping for the best helps to minimise some of the risk. Investors mustn’t overextend themselves in financial and lifestyle capacity, which means: don’t borrow more money than you can afford, make sure that cash flow commitments are adequately taken care of in relation to investment outgoings, and build and develop investment buffers to ensure measures are in place to protect yourself.

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