Should you pay off your mortgage or invest? (12 21 25)

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Should you pay down your mortgage beyond the minimum or invest instead? Today, we break down the math — and the numbers might really surprise you.

Here’s what we’re covering in today’s Clark Smart Investing newsletter:

• Should you pay off your mortgage or invest?

• What to do with your year-end bonus or gift money

• Best cash management accounts

• Q&A: When is the right time to cancel life insurance?

• Smart money move of the week

💵 Should You Pay Off Your Mortgage or Invest?

Should you pay down your mortgage beyond the minimum or invest instead? If you’re among the 85 million American individuals or families who own a home, you’ve probably asked yourself this question.

The answer depends on your mortgage rate, your investment timeline and your personal comfort with risk. Let’s break down the math and the factors that should guide your decision.

At its core, this decision comes down to comparing two numbers: your mortgage interest rate versus your expected investment return.

If you can reasonably expect to earn more from investing than you’re paying in mortgage interest, investing typically comes out ahead. If your mortgage rate is higher, paying it off usually wins.

The spread matters. A 7% expected investment return versus a 6.5% mortgage rate makes the decision more difficult than 7% versus 4%.

Should you pay off your mortgage early or invest that extra cash? It's a common financial dilemma, and the mathematically correct answer depends on three key factors. We break down the simple calculation so you can run your own numbers. Read the full article to discover the crucial preliminary steps you must take first and determine which strategy is the best financial move for your unique situation.

📚️ Recommended Reading

✅ Poll: What’s Your Take?

Every week, we'll ask a new question to get your take on the latest financial trends and topics.

Last Week’s Poll Results

We asked: “How confident are you that you are on track for a financially secure retirement?” Here’s how you answered:

• Very confident (58%)

• Somewhat confident (29%)

• Not confident (13%)

💬 Ask an Advisor

In this recurring Q&A, we share questions that have been answered by Clark Howard or Wes Moss on the podcast. Submit your question today!

Debby in North Carolina asks: When is the right time to cancel life insurance?

Wes Moss says: The simple answer to when you should cancel your life insurance is: when you don't need it anymore. There are a couple of really important milestones that indicate this. First, since life insurance is typically meant to protect your dependents (your kids or your spouse), you can often consider canceling when your kids are grown up and financially independent. This means they're out of the house and don't need to rely on your income to pay for big bills like college. The second crucial milestone is when you and your spouse have created your own financial independence — meaning you have enough saved and enough income to know that you can fund your spending needs for the rest of your lives, even without the insurance payout. That said, sometimes you are forced to cancel when a policy's rates go up every year and it becomes financially too detrimental to your current situation because you simply can't afford the premium anymore. But even if you don't technically need it anymore, if you have a term policy with a really low, locked-in rate, and it's a nominal cost, you may choose to keep it. It acts as an extra financial hedge for your family if you can easily afford the premium without cutting into your budget. Ultimately, none of us want to utilize life insurance, but its purpose is income replacement, so if you are still working and relying on that income, keeping the policy is still a nice safety net to have.

💸 Money Tip of the Week

☎️ Need Money Help?

The Team Clark Consumer Action Center is a free helpline that can help you navigate your money questions. Call 636-492-5275. Visit clark.com/cac for more information.

This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Any company names shown are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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