When it comes to home loans, the most common piece of advice you’ll hear is: “Pay it off as fast as possible.” And for many Australians, that feels like the responsible thing to do. But in reality, this strategy isn’t always the most financially effective.
In some situations, keeping your mortgage while investing excess funds elsewhere could actually put you in a stronger financial position over time.
The Logic Behind It
Let’s say you’re on a low home loan interest rate — around 5% or less. You’ve got surplus income or savings and are considering putting that toward your mortgage. But here’s the alternative:
If you invest that money in assets with higher historical returns (such as ETFs, managed funds, or making additional contributions to your superannuation), you may potentially earn 7–10% annually over the long term.
This creates what’s called an opportunity cost:
By putting money into your mortgage, you’re saving interest — but missing out on possible higher investment returns elsewhere.
When Might This Strategy Work?
This approach is not for everyone. But it can work well if you:
– Are comfortable with investment risk
– Have a stable income and good cash flow
– Are already making regular home loan repayments on time
– Want to build long-term wealth, not just reduce debt
It’s not about ignoring your mortgage. It’s about asking: What’s the most efficient use of every dollar?
The Key: Balance and Advice
While this strategy can work, it also carries investment risk. Markets fluctuate, and you need to understand your own tolerance for volatility.
The best way forward is to get a personalised review of your current mortgage, cash flow, and goals — and then compare outcomes under different strategies:
– Aggressive debt reduction
– Balanced split between loan repayments and investing
– Investment-led wealth-building while maintaining minimum repayments
Need Help Running the Numbers?
At SW Global Finance, we help clients model different scenarios based on real numbers — not guesswork.
Whether you’re aiming to pay off your loan faster, explore smarter ways to invest, or find the right combination of both, we’ll guide you through the options with clarity and transparency.
Book a Financial Health Check today to see what’s really best for your situation.
Call/WhatsApp: +84 96 275 92 07
Email: support@sw-globalfinance.com.au