Should I Pay Off My Mortgage or Invest?

You have extra money. Should you put it toward your mortgage or invest it? The answer is very different if your mortgage rate is 3% versus 7%. In this episode of She’s Talkin’ Money, I’m breaking down how I actually think through this decision with clients — because “always pay off your mortgage” and “never pay it off because you can make more in the market” are both examples of generic financial advice that leave out the most important part: your actual financial situation. We’re talking about how your mortgage rate changes the conversation, why liquidity matters so much, and what you may be giving up when you send every extra dollar into your house. I’ll also explain why home equity is not the same thing as cash, why paying down your mortgage does not make your home appreciate faster, and why being mortgage-free is not automatically the strongest financial position. In this episode, you’ll learn: why a 3% mortgage and a 7% mortgage require very different decisions how to think about where your next dollar is working hardest why liquidity should be part of the mortgage-payoff conversation the difference between building equity and reducing debt why paying down your mortgage can create an opportunity cost when I’m more interested in making additional principal payments when I’d rather see you invest the extra money how retirement changes the decision and why the emotional benefit of being mortgage-free still matters — after you understand the math You do not have to choose between “always invest” and “always pay off debt.” The better question is: What job should this next dollar be doing for you? Being mortgage-free can be a great goal. But the goal is not simply to have no mortgage. The goal is to build the strongest overall financial position you can. If you’re ready for personalized, judgment-free financial guidance, learn more about working with Shari. Shari Rash is the founder of GWA Wealth, a virtual advisory firm helping women make confident, values-aligned decisions with their money. Visit GWA Wealth to explore your next step. Talkin’ Points → where your money gets smarter. Real talk, practical tips, zero guilt straight to your inbox. Sign up here. Be sure to like and follow the show on your favorite podcast app! Keep the conversation going on Instagram @shestalkinmoney Shari Rash is a financial planner and Investment Adviser Representative of GWA Wealth, a Registered Investment Adviser. This podcast is for educational purposes only and is not personalized investment, tax, or legal advice. Nothing discussed should be considered a recommendation, and listening does not create an advisory relationship. Investing involves risk, including possible loss of principal. Please consult your own financial, tax, or legal professional before making decisions based on your individual circumstances. Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:01Speaker 00

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• 0:57Speaker 02

  This episode is brought to you by State Farm. Football has a play for just about everything. You can go deep, keep it on the ground, or draw up something nobody sees coming. And whether you want to run a flea flicker or the tush push, you need a plan to fit your unique situation. That's why State Farm takes the time to get to know you so they can help personalize coverage for your life and budget. Now that's a solid game plan. Like a good neighbor, State Farm is there.

• 1:25Speaker 03

  You have extra money. Do you put it towards your mortgage or invest it? Before you do either one, I want you to answer three questions. What is your mortgage rate? How much do you still owe? And when did you take out this mortgage? Because a 3% mortgage and a 7% mortgage are two completely different financial decisions. Welcome to She's Talkin Money, the money podcast for women who make good money, but want more from it.

• 1:58Speaker 03

  I'm Shari, 20 years in personal finance, founder of GWA Wealth and deeply invested in helping women actually understand their money. I've seen firsthand how often women are given bad, generic and one-size-fits-all advice. And always pay off your mortgage or never pay off your mortgage because you can make more in the market are perfect examples. So today, we're actually going to work through that decision. So first, let's start with the mortgage rate. It matters. It matters so much. A 3% mortgage is very different from a 7% mortgage. And the reason why I'm doing this episode today is because I just had a headline come across my phone, Wall Street Journal, that mortgages are at 7%.

• 2:44Speaker 03

  If you've taken out a mortgage in the past six years or so, the rates have varied from like two something up to now seven. But there always is a consistent question. Should I pay off my mortgage? I'm going to work through the conversations I have with my clients when they present me this question. Just like there is no one-size-fits-all answer, it's a decision-making process and that's what I want you to go through today. So if you've been wondering, should I pay off my mortgage? It's not always cut and dried. We're going to get into it, but you're now going to have the confidence of going, I'm going to continue doing exactly what I'm doing and I know why, because I've worked through it.

• 3:28Speaker 03

  Or I'm going to change my plan because I answered the questions and I have a plan now. That is financial planning and this is where financial planning is so powerful. So let's get into it. Like I said, a 3% mortgage is very different from a 7% mortgage. And when I say mortgage, this could also be applied to like car loans. You know, a used car loan was is easily 7%. Where a new car loan up until recently could be 0.99%. So I'm going to be saying mortgage, but like a car loan could also be a decision that we make of should we pay it off or should we not?

• 4:10Speaker 03

  But I will say a 3% mortgage is pretty much like free money. That is cheap money to borrow. And if you have any large sum of money, the cheaper you can borrow it, the better, generally speaking. So when we're, so, so we want to answer this question and think through this episode about how hard is our dollar working? So I say that a lot of how hard is our, how hard is our dollar working with the different, different decisions we make? So we want to ask, where am I getting the biggest bang for my buck? If I've got a really low mortgage rate and I have an extra $1,000 and probably not rushing to send that $1,000 to the mortgage, I can invest that money. I can keep that money working for me potentially later on.

• 4:55Speaker 03

  I could, you know, use some of what that money has earned, what it's grown to, to pay that mortgage. But generally speaking, I'm going to, my dollar is going to work harder for me, not going to my mortgage and maybe going elsewhere. So, but let's change the rate now. What if you're paying 7%? Now, I'm looking at that much more seriously. I'm not automatically telling you to pay it off because I still need more information. How old are you? What other assets do you have? How much are you already saving and investing? What is your mortgage balance? How much are we actually talking about? That, the rate though, that is what changes the conversation.

• 5:39Speaker 03

  So here's the first thing I want you to take away. The lower your mortgage rate, the higher the hurdle you have for convincing me that your extra dollar belongs there. As the mortgage rate gets higher, paying it down deserves more consideration. So that, that's where we're going to start. So let's make this practical. If your mortgage is around 3%, I'm, again, I'm probably looking elsewhere for the next job for your dollar. Are you investing? Do you have enough accessible savings? Is your emergency fund fully funded? Are there other financial goals that this money could fund? I'm not particularly excited about aggressively paying down

• 6:19Speaker 03

  a very inexpensive debt, simply because being debt-free sounds reasonable. What if it's around 5%, Shari? I'm not a 3%, but I'm at 5%. I'm looking at it a little bit harder. This one isn't as obvious. Maybe we invest. Maybe we pay extra on the mortgage. Maybe we do some of both. But this is where your broader financial picture really starts to matter. And so when I say like, how is your dollar working harder? So again, if we have an extra $1,000, if we're getting a $20,000 bonus, where should I put it? What should I do with it? If you have that 3% mortgage, your dollar is typically working harder for you if it's invested.

• 7:03Speaker 03

  So why do I say that? Because what is the market return on average? We'll say about 7% annually. Does it mean you're getting 7% every year? No, it does not. Some years it's 7%, some years it's negative 20, some years it's positive 45. Then it's 10, then it's negative 2. You get the point. But on average, it is 7% historically. Now, do we depend on historical data? Is that a guarantee for future results? No, it is not, but we can learn from history. So if we have our $1,000 or our $20,000 bonus, it is generally working harder for you if you invest that money versus paying down a 3% debt. But that's why I pause at around five.

• 7:48Speaker 03

  I'm taking it, taking in the info a little bit because five is a little bit closer to seven than three is. So 5%, you know, maybe we invest it. Maybe we split the difference, right? To get some money working for us in the market, but then some money paying down that debt. Now though, what if it's around 7%? Now you officially have my attention. Now I'm much more interested in whether paying down that balance makes sense. 7% still isn't an automatic answer. That's why, as, as you've listened to the episodes, that's why we just don't follow the cookie cutter financial advice because we need to take that advice, look at it, then apply it towards your situation to make an educated decision.

• 8:32Speaker 03

  We're not just being robots and following what, what, what the article says we should do. Because the article or the talking head knows nothing about us. Okay? So if you have this extra money and we want to pay it towards, towards your, your 7% mortgage, I'm not automatically saying yes to that either. Because if paying extra towards your mortgage means you have almost nothing liquid or you're not appropriately saving and investing elsewhere, we've solved one problem, reducing our debt by creating another one, not having enough investments and not having enough liquidity. So your mortgage rate does not make this decision by itself. It tells us how attractive mortgage payoff is

• 9:17Speaker 03

  relative to the other jobs your money could be doing. Okay, so our rate is not the sole determinant of this decision. So liquidity is everything. And, and this is one of the biggest lessons I want you to understand in this episode is that equity is not cash. So let's say you've got a hundred thousand dollars sitting in savings or investments outside of your retirement and you're like, I want to send 75,000 to my mortgage. I, I want to get rid of, I want to knock down my mortgage. Okay. And you do. So that's great. You, so you now have more equity in your home and less debt.

• 9:59Speaker 03

  But now that's 75,000 is inside your home. So we had a hundred, we paid 75 towards the mortgage. We have 25 left. What happens if the day after you pay off that, pay that 75,000, you lose your job? Right? And it takes you months to find a new one. And you're like, well, I guess I'll just go borrow the equity in my house because I have all of this equity. Remember that's 75 grand at least. So I'm just going to go borrow that and it'll, I'll be okay. So you go to the bank and go, hey, remember that extra 75,000 I gave you? I'm going to need like 20,000 of that back just so I can live. Because I lost my job. I don't have my emergent, I've used up my emergency savings.

• 10:44Speaker 03

  So yeah, just, just give me that back. They're going to say, no way. To access your equity in your home, you're generally, generally going to have to sell the property or qualify, big word there, to borrow against it. And borrowing against it also means you're paying interest again. So you're taking down, taking out a loan to have access to the money you put into your house, to have access to your own money. So I'm not going to tell you to aggressively pay down your mortgage if doing that leaves you without adequate liquid assets. Liquidity is gives, is what gives you options. Equity does not give you options. Equity, having a lot of equity just like, sounds good. That's a, that's like a buzzword.

• 11:34Speaker 03

  Paying down your mortgage isn't just a debt decision. It's also an asset location decision. How much of your wealth do you want accessible versus locked inside your house? So here's something else advice women get is pay down the mortgage to build equity. So there's another distinction I want to make. I'm not paying down my mortgage simply because I want more equity. Home appreciation is what it is. If your house goes from 700,000 to 750, the house increased by 50,000, whether you owed 500,000 or 200,000. Putting more cash into the house doesn't cause the house itself to appreciate faster.

• 12:18Speaker 03

  It just means when you sell it, you're getting more cash back. So if we're putting extra money toward your mortgage, the benefit I'm interested in is we are reducing debt. We are reducing a future liability. We are reducing the amount of interest associated, associated with carrying that debt. That is different from saying, I want to build equity, so I'm going to send every extra dollar to my mortgage. You need to know what you're actually accomplishing with that extra payment. Mortgage prepayments reduce your debt. They don't increase your home's rate of appreciation. And this is exactly why I've seen just how much bad, generic, one size fits all money advice, women are expected to follow, but it really just ends up confusing them.

• 13:03Speaker 03

  Your mortgage doesn't exist separately from your savings, your investments, your retirement goals, and everything else you're trying to do with your money. That's the work I do at GWA Wealth. We are looking at every aspect of your financial life and we are making complete holistic decisions, not decisions that are just based off a headline or what a talking head tells you to do. If you're doing well financially, but you want help figuring out where your money should actually go next, you can learn more about working with me at GWawealth.com. GWA Wealth is a registered investment advisor. This content is educational and not individualized advice. So now let's go back to the third question I asked at the beginning of the episode. When did you take out your mortgage?

• 13:48Speaker 03

  Because I want to know where you are in the life of this loan. If you just took out a higher rate mortgage and you're in a strong financial position everywhere else, I'm much more interested in talking about making additional principal payments. That is different from someone who's been sitting on a very low rate mortgage for years. And this is why I want you to actually pull up your mortgage information, rather than just say, my payment is 3,500. I want the loan. I want to see the rate, the balance, the origination date, and the remaining term. Those are the numbers we are making this decision with. Two people with the same monthly mortgage payment can have completely different decisions

• 14:34Speaker 03

  because the rate, balance, and remaining life of the loans are different. So now what are we giving up to pay down our mortgage? This is opportunity cost. So let's say you have an extra 2,000 a month. If you send it to your mortgage, what aren't you doing with that 2,000? That's the question. Are you already saving enough? Are you already investing enough? Do you have enough liquid money? If yes, great. Now a mortgage prepayment may have a much stronger case. But if you tell me, I'm barely investing, I don't have that much accessible cash, but it, but I'm putting every extra dollar I have towards my 3% mortgage because I want

• 15:17Speaker 03

  to build up my equity and I just want this debt gone, I'm going to push back. Because getting rid of a mortgage is one financial goal. It is not your entire financial plan. So before making an extra mortgage payment, identify the opportunity cost. What other financial job loses that dollar? What goal are we not achieving or not working towards because our mortgage is getting all of our extra money? Now let's put everything together. I'm more interested in additional mortgage payments when I see a higher mortgage rate, strong savings already in place, strong investing already happening elsewhere, enough liquidity that putting money into the house doesn't leave you cash poor.

• 16:01Speaker 03

  And particularly if we're earlier in the mortgage and you're carrying a significant balance at that higher rate. Now let's flip it. I'm less invested in aggressively paying down your mortgage when your rate is very low. You don't have enough accessible assets. You're not saving and investing adequately elsewhere. Because again, we're trying to find the highest value job for your next dollar. How are you getting the biggest bang for your buck, literally? That is the decision we are making. So there is one situation where the answer can become more personal, and that's retirement. If you're getting close to retirement and you tell me, I do not want to enter retirement with a mortgage, I'm listening.

• 16:45Speaker 03

  I'm still not letting you derail retirement to accomplish it. If, if becoming mortgage free means you're wiping out the money you need to actually fund retirement, that's a problem. You cannot take out loans for retirement, but you can take out loans to, to live, clearly, because we, we do it, we all do it. But if you're financially strong, you're well-funded elsewhere, and you, and eliminating that mortgage reduces the liabilities you're carrying into retirement, and also the weight of the mortgage emotionally into retirement, that's a legitimate part of the decision. So the important distinction is, we aren't sacrificing retirement in order to say we're mortgage free.

• 17:28Speaker 03

  We're asking whether paying off the mortgage fits into an already healthy retirement plan. The closer you get to retirement, the value of reducing future liabilities can become more important. But the mortgage payoff has to work with the retirement plan, not compete with it. So now we, we went through the math. We talked about the math of it, of how is your dollar working harder? Is it working harder investing? Or is it working harder paying down your debt? Now we're going to let the feelings come up and have a seat at the table. Maybe the math says you don't, you, you don't need to pay off your mortgage, or, or it doesn't make sense for you to, your dollar works harder for you elsewhere, but you still really want it gone. Okay, that matters.

• 18:12Speaker 03

  Maybe carrying a mortgage into retirement would make you uncomfortable. Maybe being mortgage free gives you a level of security that's worth something to you. Personal finance is personal. It's not one size fits all. It's not do this and it doesn't matter what you think, or if it keeps you up at night, or how you feel. But I want you to make that choice after you understand the financial trade-off. Not because someone told you all debt is bad, not because someone said you should have a lot of equity, not because you think owning your house outright automatically makes you financially safer. Because it, it, it may not. And I also don't want you to make this decision because you're chasing the feeling of being done. Like you just want to go into the bank and make that last payment and, you know, cheer

• 18:57Speaker 03

  for yourself. Like, yeah, that's, that's great, but, but that cheering moment, that moment could also cost you a lot of money. So we have to do the math first, then decide how much the emotional benefit is worth it to you. So here's how we make it make sense. I want you to pull up your mortgage. I want you to write down your mortgage rate, your remaining balance, when you took out the loan, and how much time is left. Then look at everything outside of the house. How much do you have in liquid assets? Are you already saving and investing appropriately? What would you do with the extra money if it didn't go to the mortgage? Now ask, where does my dollar work hardest?

• 19:38Speaker 03

  If you've got a 3% mortgage, limited liquid assets, and you're behind on investing, that answer, I hope, is pretty clear by now. If you've got a 7% mortgage, plenty of liquidity, and you're already investing, that answer may look completely different. And if you're somewhere in the middle, you don't necessarily have to pick one. You can split the extra dollars between investing and paying down the mortgage. So should you pay off your mortgage or invest? Start with the rate, then look at your balance and where you are in the loan. Protect your liquidity. Make sure you're saving and investing appropriately elsewhere. You need to understand what you're giving up by putting that extra dollar into your house. And then you need to decide where that dollar works the hardest.

• 20:23Speaker 03

  Being mortgage free is a great goal, but the goal can't simply be have no mortgage. The goal is to build the strongest overall financial position you can. I'm Shari. This is She's Talkin Money. I can't wait to see you next week. Thanks for joining me today.

• 20:52Speaker 01

  They're running a cover two defense. But you're running to get game day deals on Uber Eats. Keep everyone at tonight's watch party fed with deals from your go-to restaurants. Or stock up with deals on your favorite snacks and groceries. Whatever the occasion, get game day deals on Uber Eats all season long. It's not football without food. Uber Eats. Order now. Terms apply. Product availability varies by region. See app for details.

• 21:23Speaker 02

  This episode is brought to you by State Farm. Football has a play for just about everything. You can go deep, keep it on the ground, or draw up something nobody sees coming. And whether you want to run a flea flicker or the tush push, you need a plan to fit your unique situation. That's why State Farm takes the time to get to know you so they can help personalize coverage for your life and budget. Now that's a solid game plan. Like a good neighbor, State Farm is there.