Should You Pay Off Your Mortgage Or Invest In A MIC?

Is it smarter to focus on paying off your mortgage, or should you invest a portion of your money while paying off your mortgage over a longer term?

While no one likes debt, it’s essential to consider your financial portfolio from a holistic perspective to see how alternative investment strategies can help you grow your wealth. If you’re spending most of your income on your mortgage trying to pay it off faster, you may be missing out. Ignoring investment opportunities while trying to pay down your mortgage faster could stop you from reaching your retirement goals. Similarly, before you put a large chunk of money from a raise or inheritance towards your mortgage, look at all the options to see how that money can best work for you.  

Time & goals

What are your goals, and where are you in your timeline? These are essential questions to consider when choosing how much to put towards debt repayment or investing. A significant portion of your monthly mortgage payment will go towards interest rather than paying down the principal in the early years. 

Let’s say you pay $1000 a month towards your mortgage. Close to $600 of your monthly payment could go towards the interest in the first ten years, with only $400 towards the principal. Twenty years in, this would flip and be closer to $700 towards the principal and $300 towards the interest. These numbers will change based on the cost of the home and the mortgage terms. However, focusing on paying off your mortgage when most of your monthly payments are going towards principal and not interest may not make much sense. 

You need to consider your financial goals, when you want to achieve them, and how old your mortgage is before deciding how to split your income between debt repayment and investing. 


Consider this: You’re paying 3.5% interest on your loan, but a quality mortgage pool provides 5-10% returns. Suppose you’re paying 3.5% on your outstanding amount on your mortgage over ten years but receiving an average of 7% return on your investments. In that case, you could make double the amount you pay out interest in this time — depending on how much you invest and where you invest. You could better set yourself up for retirement by investing a portion of your portfolio rather than focusing 100% on mortgage payments.  

Investing while paying off your mortgage allows you to capitalize on the higher interest rates of alternative investments in real estate while also benefiting from the increased value of your home over time. If you focused on paying off your mortgage, you would miss out on the power of compounding interest in your investments. Plus, your home will still be worth the same amount at the end of this term, regardless of how quickly you pay off your mortgage. 

Pros & cons of paying off your mortgage

If you choose to focus on paying off your mortgage early, you’ll

  • Be debt free
  • Save some money on interest payments
  • Have the ability to leverage the equity in your home
  • Can free up more money for investing going forward

However, some of these pros only seem like pros when we don’t consider the outcome if you choose to split your money between mortgage repayment and real estate investment over the original timeline of your mortgage (generally 25-30 years). 

Paying off your mortgage faster may be appealing because you want to be debt-free. You may end up debt-free with this method. However, the money you have put away in savings or investments will be substantially less. By investing while you make mortgage payments, you end up debt-free with more money invested. It will just take a bit longer to be debt-free.

You may save money on interest payments by paying off your mortgage faster. Still, you miss out on the positive impacts of compounding interest and higher rates of return in alternative investment strategies such as MICs. 

Sure, leveraging the equity in your home towards other purchases or investments seems excellent. However, it’s tying up a lot of your investing power in the equity in your home rather than diversifying and further protecting your investment portfolio. Not to mention, you miss out on tax deductions once your mortgage is paid off. 

We’ve said it before, and we’ll say it again: compounding interest. If you think that by paying off your mortgage faster, you’ll have all of that extra money later to invest, you’re missing out on the power of time and compounding interest to grow your wealth. Investing while you pay your mortgage off in a more conservative manner will allow you to capitalize on the benefits of interest rather than simply paying interest on your mortgage. Make interest work in your favour.
Each situation is unique to your financial situation and risk tolerance. Talk to a financial advisor or someone well versed in real estate investment tactics to learn more. Jordan on our team is here to help you determine the long-term impacts of investing with a MIC. Get in touch with Jordan today to learn more.

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