Episode 7- The Great Debate

On this episode the guys discuss the pros and cons of paying down lower interest debt over investing for your future.

Websites Mentioned on the podcast:

Headline of the week: Trading activity climbs ahead of presidential election

Compound interest calculator 

https://www.coachcarson.com/blog/

https://www.biggerpockets.com/

The Great Debate: Pay down low interest debt or invest for your future?

Example:  Let’s just say, for argument purposes you have a 500,000 mortgage at 3.25% interest, you just bought the house.  Payment is $2,200 a month (P&I).  You have an extra $1,000 you were thinking of putting toward the mortgage to pay it off early as you hate debt.

If you applied the extra $1,000 toward the mortgage.  You would reduce the mortgage from 30 years down to 17 years. At the end of 17 years, you would own your house and you would have an asset worth $500,000.  Other 13 years, you take the money you were putting toward the mortgage and invest it.  $3,200 invested over 13 years at 8.5% interest = 862,000

End of 30 years: $500,000 house + $862,000 investment account = $1,360,000 in assets

Next example: If you paid as agreed on the mortgage ($2,200) for 30 straight years and took the extra $1,000 you have and applied toward investing in an S&P 500 index fund and it averaged 8.5% per year, you would have $1.5M in your investment account.

End of 30 years: $500,000 house + $1.5M in your brokerage account. = $2,000,000 in assets

You end up with 47% more money if you invest the extra $1k vs paying down the mortgage.  This is because you were borrowing money at 3.5%, but you were investing your money at 8.5% interest/growth.

Hops Showdown:

Lance:  Riverdog Brewing Company (Ridgeland, SC) - Riverdog IPA: 88 Points

Scott:  Heavy Seas Brewery (Halethorpe, MD) - Loose Cannon IPA: 93 Points