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Should I pay money off my mortgage or should I add value to my property?

Reduce debt vs. increasing value

I recently had a client ask whether she should pay a lump sum off her loan, as her fixed term was about to expire, or use the funds she'd saved to put a new bathroom in her property.

The answer around which option is best is actually not always straightforward.

It depends a lot on your goals, interest rates, the market and a few other factors.

Let's explore the options...

Start with the end in mind

And by that, yes I do mean consider what you're planning for and where you're heading.

Let's consider my client again for a second. 

Her ultimate goal was to bolster equity in her home with an eye towards acquiring an investment property down the line. Now, for someone with a plan like hers, my advice leaned towards evaluating the potential return on investment.

How do I know what the best option is?

Generally, if the improvements you're considering, whether it's a fresh coat of paint, a revamped bathroom, a modernized kitchen, or even sprucing up the exterior with landscaping or a new fence, are projected to increase the overall value of your property by a significant margin compared to the investment you're putting in, then it's a no-brainer.

Investing in renovations and additions can be a really strategic move towards building equity and realizing your long-term financial goals.

For instance, if you're investing $5,000 but anticipate a $15,000 bump in property value, it's a sound investment that can pay dividends in the future.

Bear in mind this is not always the easiest to establish. I'd recommend a friendly Real Estate Agent who might be able to give you some advice around the best place to add value.

What if I just want to pay my mortgage off?


If your primary aim is simply to eliminate your mortgage debt and move forward without aspirations for additional property investments, then prioritizing mortgage repayment might be a better choice.

Whether it's making higher regular payments or channeling a lump sum towards your mortgage, reducing your debt burden can provide a sense of financial security and a bit of  freedom, too.

It all depends on you

Ultimately, the decision hinges on your individual goals and financial roadmap.

Are you aiming to build equity for future investments, or are you focused on achieving mortgage-free status? Understanding your destination is key to determining the best route to take.

Also, don't hesitate to explore alternative banking products or have a chat with us to assess if there are better-suited options available to align with your objectives.

A mortgage restructure to make better use of available cash savings, or refinancing to a better interest rate could potentially offer greater flexibility and benefits tailored to your needs.


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