Should you pay down your Mortgage or Invest?

Owning your home is often the main financial goal for Australians.  As soon as we take a mortgage we are solely focussed on paying it down.  We love the great ‘Aussie Dream’ as much as we hate being in debt.

But is there a better use for your excess cashflow than just paying down your mortgage? 

Over my 20 years in the industry, it is one of the most common questions when it comes to client’s mortgages – should I put my excess cashflow against my mortgage, or should I Invest it? And with interest rates at an all-time low, it may be time to look at this very question. 

Paying Down your Mortgage

Guaranteed Return:  

By making extra repayment on your mortgage with say a 3% interest rate you are effectively making a 3% return.  This is compounded by the fact that it is tax free.

Peace of Mind:

Not a quantifiable reason, but by no means should it be discounted.  Having fully paid off your house does provide some level of financial protection as well as eliminating one of the largest contributors to a household budget, the mortgage repayment.  

Build up equity:

Once you have paid down your mortgage, you can utilise the equity to make further investments. But this lends itself to the chicken and egg question, which came first?

Investing Excess Cash Flow


The most obvious reason to use your excess cash flow for investment would be the returns. The Australian Shares have returned an average of 8.9%* over the past 20 years. When comparing this to your low mortgage rate, you could be forgoing a higher investment return.  


The basics of investing – don’t put all your eggs in one basket. Residential property in Australia is seen as a very ‘safe’ asset. However, it still has risks and is open to market factors.  Using your excess funds to diversify your investments will reduce the total risk of your financial portfolio. 


Shares are a liquid investment; your investment can be redeemed and in your account in a matter of days. In comparison, depending on your loan, it could take a while to redraw on funds paid into your mortgage. 

Other Considerations 

Of course, it’s not black and white and there are other considerations that you should take into account. 

Type of Loan:

Some types of loans do not allow for or restrict the amount of extra repayments you can make. Before you start trying to work out which option is better, it may be worthwhile to have a discussion with your mortgage specialist to understand your options.  

Risk Profile

Your risk profile is probably the most important consideration, as it takes into account :

  • Investment Horizon
  • Attitude to risk.

Are you willing to move money from a defensive asset (mortgage/cash) and invest it in growth assets such as shares? Are you comfortable with the increased volatility? In addition to this is time on your side so you could ride out any market fluctuations?

So which is better: paying down your mortgage or investing?  It really depends on your financial situation. Paying down your mortgage is safe and a great way to accumulate wealth. Establishing a portfolio better diversifies your portfolio and provides scope for superior returns but has more risk. 

The suitability of any financial strategy will be different for each individual. If you would like to further discuss ways to build your wealth, schedule a no-obligation Discovery Conversation with us.



Authorised Representative of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. The information provided in this document, including any tax information, is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser

Discovery Wealth Advisers

Author Discovery Wealth Advisers

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