Make of thy dwelling a profitable investment.— George S Clason’s The Richest Man in Babylon
The title of this article should be, “Why I’d always buy my own home over investing in the stock market”, but it was too long.
I invest in the stock market. On a monthly basis I purchase units from a low cost index fund via Vanguard, which by the way, are a superb company. I also have a workplace pension, which I invest in, again, using a low cost index fund.
I know that the stock market is a prime place to make money over the long term. The two other avenues to make money over the long term is buying rental properties and starting/owning your own business.
There’s often a debate of what is better financially, invest in the stock market or pay off your mortgage. At the moment with interest rates so low and mortgages as cheap as they may ever be, the financial return you receive by paying off your mortgage is nowhere near as good as investing the money in the stock market.
But, for once, I just don’t care.
Why? Because my house is my home. It’s where I live. It’s where my family live. It’s the place I come home to at night and the place I wake up in every morning. It’s where I sleep when I’m ill, and where I invite family and friends to visit.
I feel a home is so personal that no roaring bull market returns can equal what a home offers.
A home that is mortgage free, and all yours, is more part of your life than hundreds of thousands of pounds in a Vanguard index fund can ever be.
So at this moment, if I discovered I had a spare £100 a month, would I put it into my index fund and contribute more, or would I overpay my mortgage? The head says index fund, but the heart… of course says, I’d increase my over payment on my mortgage.
There are several financial benefits to this.
- The first is by overpaying, you pay less interest in the long run.
- The second is you pay the debt off early, so you stop making mortgage payments earlier, which reduces your expenses considerably.
- The last and most important is the peace of mind you receive from knowing the home is all yours and you no longer have to pay for it.
Sure, you’ll get better returns in the stock market, but the inner peace a paid off home offers is priceless.