While mortgage brokers have long advocated the notion of paying off one’s mortgage, this age of low interest rates has created yet another advantage to the concept.
In a recent article in the Toronto Star, Moshe Milevsky, a professor at York University’s Schulich School of Business, argues that in today’s volatile stock market, money is only earning around 3% – if individuals are willing to lock in for a few years. Money in demand deposits and savings accounts are earning even less – somewhere around 1%.
At that rate, Milevsky argues, it will take a retirement nest egg 72 years to double – not a great rate of return to say the least.
So even though mortgage rates are incredibly low, they’re still higher than what people are earning on their savings. So if your clients come across some extra cash, wouldn’t it make more sense to pay down their mortgage than invest it in an investment vehicle that’s earning peanuts?
