Keep Mortgage, Invest Wisely

The idea of keeping a mortgage financed "at max forever" generally refers to the notion of not paying off a mortgage early and instead utilizing the capital elsewhere, typically in investments. The rationale behind this strategy is based on a few financial principles:

  1. Interest Rates: If the interest rate on your mortgage is lower than the expected return on an alternative investment, then it may make sense, from a purely numerical standpoint, to invest the excess funds rather than using them to pay down the mortgage.

  2. Leverage: A mortgage allows homeowners to leverage a small amount of money (the down payment) to control a larger asset (the home). As the home appreciates in value, the return on the down payment can be significant.

  3. Tax Benefits: In some countries, the interest paid on a mortgage is tax-deductible, effectively reducing the net interest rate you pay.

  4. Liquidity: Money that's tied up in home equity (by paying down the mortgage) isn't as easily accessible as money in an investment account. By not paying off the mortgage early, you maintain greater liquidity.

  5. Inflation: Over time, inflation can erode the real value of fixed expenses, like a mortgage payment. This means that the same mortgage payment might feel "cheaper" in the future compared to today due to the decreased purchasing power of money.

However, it's essential to understand the risks:

  1. Investment Returns Are Not Guaranteed: While the interest on a mortgage is fixed, investment returns can be volatile. There's no guarantee you'll earn more by investing than you would save by paying down the mortgage.

  2. Peace of Mind: For some people, the psychological benefit of being debt-free is more valuable than potential financial gains from investing.

  3. Risk Tolerance: This strategy is inherently riskier. If there's a market downturn or if personal financial circumstances change, having a large mortgage can become burdensome.

In summary, while there can be financial benefits to keeping a mortgage and investing excess funds, it's crucial to weigh the potential rewards against the risks and consider your financial situation, goals, and risk tolerance. It's always a good idea to consult with a financial advisor before making such decisions.