Congratulations, you’ve purchased your first property with the help of a mortgage! This milestone marks an exciting new chapter in your financial journey. However, the next steps in managing your mortgage are crucial and can significantly impact your long-term financial stability and growth.
Whether you aim to achieve financial security, maintain flexibility, or accelerate wealth building, how you handle your mortgage will play a pivotal role in your overall financial strategy. Let’s explore three distinct strategies for managing your home mortgage.
1. Pay off your home mortgage and invest in properties
One strategy is to pay off your primary home mortgage as soon as possible. Owning your home outright provides financial security and peace of mind. With a clear title, banks see you as a more attractive borrower, making it easier to get loans for investment properties. Once your home is paid off, you can leverage mortgages to buy more properties and grow your real estate portfolio without risking your living situation.
2. Pay off most of your home mortgage
Another approach is to pay off a significant portion of your home mortgage but not necessarily the entire loan. This reduces your debt and monthly payments, giving you some breathing room for unexpected expenses. Keeping a smaller mortgage allows you to maintain some leverage, making it easier to access funds if needed. This strategy balances debt reduction and flexibility for other investments.
3. Never pay off your mortgage, stay leveraged
The third viewpoint is all about keeping a mortgage to leverage debt for building wealth. Mortgages are often considered good debt, with lower interest rates compared to other loans. By keeping a mortgage, you can invest your extra money in higher-return opportunities like the stock market or additional real estate. The idea is that the returns from these investments will outweigh the cost of the mortgage interest, helping you build wealth faster. Plus, mortgage interest can be tax-deductible in some countries, providing further financial benefits.
Each of these strategies offers unique benefits and potential drawbacks, and the best choice depends on your financial goals, risk tolerance, and personal preferences. Whether you prioritise security, flexibility, or growth, understanding these options can help you make an informed decision about your mortgage.
Keisha Bailey is a financial expert who teaches people how to earn passive income, create wealth and reclaim time and reach financial freedom by investing. Keisha works with investors to create highly profitable portfolios so they can build wealth faster. If you are looking to learn how to level up your money, she can be reached at [email protected].
