Is it more practical to invest than pay down mortgage?

While the goal of homeowners is to get out of the debt trap as soon as they can, there are times that it would be more practical to invest first to build more wealth, says a market watcher.

In a think piece in The Motley Fool, market watcher Christopher Liew said borrowers thinking of investing should consider the current interest rate environment.

"If your investment prospect can deliver a higher rate of return than the interest rate on your mortgage, you can invest. However, if your mortgage's interest rate is higher or can outperform your investment prospect, you should pay off or aggressively pay down your mortgage," he said.

While refinancing could also be an option given the favourable mortgage rates forecast, Liew said it is crucial to compare the rate predictions with some investment options.

Another important aspect is choosing investment vehicles. Shares, high-grade bonds, and international stocks are some examples of investment vehicles that managed to outpace the average interest rate over the long run.

In a separate think piece in Money Sense, financial planner Heather Franklin said financial goal-setting should be fluid when considering mortgages and other financial commitments.

"While mortgage debt is extremely important to address, when we look at it within the bigger financial picture of your household's goals, we must also consider shorter-term goals that need to be addressed ahead of longer-term goals such as early retirement or paying off your mortgage," she said.

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