(1) have sufficient buffers in place, (2) are on track to reduce debt by a
sufficient level by the time you retire, and (3) if your cash flow is not
sensitive to interest rates, then it’s likely that investing in growth assets
(investments) is more important than making additional loan repayments.
meet people that have few investment assets, other than superannuation, that
have (for example) spent the past 5 years repaying their $350,000 home loan to
this is a waste – a missed opportunity.
cases, it is likely that they would have easily repaid their home loan by the
time they retired, as their debt was relatively immaterial.
they would have been much better off beginning investing 5 years ago (e.g., the
international share index has returned 11.5% p.a. over the past 5 years) and
taking longer to repay their home loan.
why investing is likely to generate more wealth than repaying your home loan.
this is because it is likely that the after-tax percentage return from
investing in shares or property will be more than the home loan interest rate,
on average, over the long run.
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Friday, 27 October 2023