Owning a home with a low interest rate is a financial advantage that people may not fully appreciate. Your fixed-rate mortgage, in the 2%-3% range, is more than just a financial obligation—it's an asset. The Wall Street Journal recently highlighted the unique value of this asset, shedding light on the potential benefits of viewing your mortgage from a different perspective.

"Individuals with low fixed-rate mortgages can view their debt as an asset. Instead of paying off your 'debt' as quickly as possible by making extra payments to the principal, consider investing those additional principal payments.”

Understanding the Opportunity of Investing Instead of Making Principal-Only Payments to pay down Your Mortgage

Rather than focusing on quickly paying down your mortgage through extra principal payments, consider the alternative of investing those funds or paying down higher interest debt like a credit card, car note, or any other variable rate debt. For example, if you contribute an additional $200 per month towards your 2.75% mortgage, you could achieve greater financial growth by redirecting that amount into investing that money into a money market account that pays 5.5% interest.

How Do the Numbers Breakdown?

Using the scenario mentioned above, paying an extra $200 each month, you can pay your mortgage in 23 years instead of 30. If you deposited the same $200 into an FDIC-insured savings account that earned between 4.5% and 5% for 20 years, your $48,000 would now be worth $82,207, before income taxes. However, investing $48,000 over 20 years in the S&P 500, historically earning 11%, would be worth over $173,000. Interest rates and stock market returns are constantly changing, please do your own research and keep in mind these are only examples.

While more risk is associated with investing in the stock market, this illustration highlights the value of your low, fixed-rate mortgage. At Standard Mortgage (NMLS# 44912), our priority is your comfort and financial well-being. If paying off your home quickly aligns with your goals, that's commendable. However, we want to ensure you know this unique opportunity created by your low, fixed-rate mortgage.

Your mortgage is not just a financial obligation—it's an asset that can be leveraged to achieve greater financial growth. By understanding the unique advantages of your low, fixed-rate mortgage, you can make informed decisions that align with your financial goals and priorities. If you have any questions, don't hesitate to contact a Standard Mortgage customer relationship development team member.