What If We Could Invest Our Mortgage?

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Just the other day I analyzed our mortgage related expenses as it pertains to our monthly spending. The conclusion was that my family needs to budget $1,500 a month to cover our mortgage and escrow payments for the year.

Each month we pay $1078.21 on our 30 year fixed rate mortgage. In addition to our mortgage, my wife and I put away another $422.63 in our escrow account that we managed on our own.

Years ago we decided to handle our own escrow account instead of giving our mortgage lender a free loan on our money. At the end of the year, our escrow balance is used to make one time payments that cover our homeowner’s insurance and property taxes.

In total, we plan to budget $1,500 in mortgage related expenses each month. Over the course of a year, that comes out to be a large sum of money – $18,000.

With such a large amount of money being spent on our home, it got me thinking. Wouldn’t it be nice if we could invest that money into dividend paying stocks?

While it would be awesome to invest this amount of money instead of using it on our home, it is not feasible for us at this time.

That isn’t to say that it wouldn’t be fun to see how much our portfolio could grow by investing $18,000.

Investing Our Mortgage in Dividend Paying Stocks

Wouldn’t it be awesome if my wife and I could invest our $18,000 in mortgage related expenses this year? It would certainly give our future dividend income a big boost.

Let’s take a look at how much our income could grow.

  • Investment Amount – $18,000
  • Yield on Cost – 4.375%
  • Future Dividend Income – $785.50

Note – The yield on cost used is an average of all the stocks found in the Money Sprout Index. There is no guarantee of this yield but it is used to estimate a likely return.

Imagine that? Increasing our future dividend income by almost $800 just in the first year!

If we kept the momentum going by investing another $18,000 in year 2 (along with our dividend income and original investment), we would increase our future dividend income to $1,609.45!

What about 5 consecutive years of investing $18,000 along with reinvesting dividends? At the end of 5 years our future dividend income would be $4,297.44!

Final Thoughts

My wife and I enjoy having a home to raise our family, despite the costs involved. The mortgage, insurance, and taxes alone cost us around $18,000 per year which is a significant percentage of our income.

Investing that $18K in dividend paying stocks would certainly help us take a step towards reaching our financial independence goals. Especially if we invested that kind of money for 5 consecutive years.

Even though we are not ready to give up our home anytime soon, it is helpful to see just how far a large investment could grow. What if we built a second income of say $20K that could be used to invest?

Maybe there are other ways we can invest more like using $5,000 of our tax return every year? There are certainly other options to come up with this kind of money.

The question is how much do we want to sacrifice to boost our future dividend income?
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What do you think?

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Click Here to Leave a Comment Below 3 comments
DivHut - June 25, 2015

Money has to go towards something. It may be a mortgage, a new business venture or dividend paying stocks but the bottom line is that it’s going towards building something for your future. It can be equity, a successful business or passive dividend income. This money you spend each year on a mortgage will serve you much better than an $18,000 new car or some other nonsense that will have much less value in five or ten years down the road.

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    John - July 1, 2015

    @DivHut – Agreed that paying for a mortgage is a much better way to use your money than on a new car, etc. Just wish I had a bit more of it to invest – lol.

    Thanks for stopping by!

    Reply
Earning $50 in Side Income per Day - July 1, 2015

[…] a recent post, I discussed a scenario where we would take our mortgage related expenses and invest them in dividend stocks. We estimated that over the course of a year, these expenses (mortgage, homeowner’s […]

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