Trade

Pay mortgage or invest

Finance Fail: Pay off my home or invest the money? In the real world there are three things you’re not supposed to talk about: pay mortgage or invest, money, and religion.

The fact of the matter is that there are millions of articles about paying off your mortgage vs. I’ve found—have bothered to talk about bankruptcy. Maybe it’s because bankruptcy is somehow impossible if you’re perfect with your personal finances. Personal finance is too safe that it’s dangerous. Screw the Emergency Fund, Buy a Home. Most people say you should pay down your home mortgage because you’re getting a risk-free return. The only risk-free returns are found in US Treasuries, and only because the Treasury can, at any time, come up with the dollars they need to make good on your Treasury securities.

Both home mortgages and US Treasuries are US dollar denominated, assuming you live in the United States, so the risk of a compete dollar collapse is irrelevant. Own more of the home, and thus have more equity on the line should it fall in value. Own more of the home beyond bankruptcy shelters. For a overview of the economic dynamics of the US real estate market, see the post on home price trends.