One of the biggest money questions Aussies face is surprisingly simple: should you pay off your mortgage or start investing? With the cost of living climbing, interest rates bouncing around, and a constant push to grow your wealth, it’s not always easy to know what to do first. The answer? It really depends on where you’re at in life, what your goals are, and how much risk you’re comfortable with.
This guide unpacks both sides, exploring the pros and cons of each path and how you might blend the two to build a stronger financial future.
The Case for Paying Off Your Mortgage
When you think about the biggest debt most people carry, it’s usually their home loan. Knocking that off can offer more than financial wins — it often brings peace of mind too.
Less Stress, More Peace
Let’s be honest, debt can be mentally exhausting. Month after month of repayments can wear you down. Paying off your mortgage early can lift a big weight off your shoulders and ease the pressure on your budget.
Save Big Over Time
Chipping in extra, even just a little each week or fortnight, can slash the amount of interest you pay and cut years off your loan. It’s one of the simplest ways to save a serious amount of money in the long run.
Extra Income Helps
Got a side hustle? Freelance gigs? Overtime? Putting that extra cash straight into your loan can speed things up. Plenty of Aussie families have reached their goal of being debt-free way sooner this way.
Your Home, Fully Yours
Owning your home outright gives a level of security that’s hard to beat. When things get uncertain, knowing you’ve got a paid-off roof over your head is incredibly reassuring.
The Case for Investing Instead
While paying off debt lowers what you owe, investing builds what you own. And that can be powerful over time.
Potential for Bigger Returns
If your investments are returning 7 to 9 per cent a year, and your mortgage interest is sitting around 5 per cent, the maths starts to lean in favour of investing. That’s where the Pay Off Mortgage or Invest First debate really kicks in.
Compound Interest Does the Heavy Lifting
The earlier you start investing, the more time your money has to grow. Even small amounts can turn into something big over the years, thanks to compound growth.
Offset Accounts Give Flexibility
Not sure where to put your extra funds? Using an offset account helps reduce the interest you pay without locking the money away. It gives you breathing room if life throws you a curveball.
Diversify Your Wealth
Instead of having all your money tied up in your home, investing lets you build wealth through shares, managed funds, or other assets. It’s about not putting all your eggs in one basket.
When to Pay Off Mortgage or Invest First Depends on Your Situation
Interest Rates
If rates are on the rise, it might make sense to focus on reducing debt. But if they’re low, your money could grow more by investing.
Your Income
High-income earners might be able to do both — invest and repay faster. If your income is tighter, starting with the mortgage might bring more peace of mind.
Life Stage
Younger Aussies often have time on their side, which makes investing more appealing. Families usually look to reduce debt first to free up cash flow. And those heading toward retirement tend to want the security of being mortgage-free.
Watch Out for Lifestyle Creep
It’s tempting to upgrade your home as your income grows. But jumping into a bigger loan too soon can undo your progress. It’s smart to reduce your current debt before taking on more.
How to Balance Both
In reality, the smartest strategy isn’t choosing one over the other. It’s finding the sweet spot in between.
Here’s how to approach it:
- Split your extra income between your mortgage and investments
- Use an offset account to keep your options open
- Revisit your strategy often — especially when interest rates or your income change
- Learn the basics of investing, tax benefits, and how to make extra repayments work for you
Final Thoughts: Should You Pay Off Mortgage or Invest First?
There’s no one-size-fits-all answer to the Pay Off Mortgage or Invest First question. If you’re after security and less financial stress, knocking out your mortgage may feel like the right move. If you’re in it for long-term growth and can handle some risk, investing could offer better returns.
For most people, a mix of both tends to work best. As long as your money is moving — whether into your home loan or your future wealth — you’re heading in the right direction.
If you’re working out whether to Pay Off Mortgage or Invest First, grab a copy of our best-selling book at www.wealthplaybook.com.au. It’s packed with real-world tips to help you grow your wealth, cut debt, and build a future you’re proud of.
