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The Old-School Real Estate Rule You Should Disregard Right Now

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The real estate market is anything but certain at the moment — property and rental prices seem to be skyrocketing as fast as the cost of gas, and homes are flying off the market. Even in more even-keeled times, real estate and investment advice has been contentious: People have long-held opinions that they swear by, while others hold fast to opposing views. If there was ever a time to be cautious about real estate advice, it’s probably now.

Still, sometimes there’s outdated advice that once held a lot of value, but is simply no longer relevant. 

“Pay off your mortgage as quickly as possible,” is one of those outdated pieces of advice, according to Jack Cotton, an agent with Sotheby’s International Realty in Osterville, Massachusetts.

At one point, this was considered good advice. “Your home is the foundation of your financial situation, so the idea was that owning it free and clear brings an added level of security to you and yours,” explains Cotton.

This is understandable: Typically, you’re told that it’s best to pay off your debt as soon as possible. This is especially true in the case of student loans, where the sooner your debt is paid off, the less is paid in interest — thus, the more you save over time.

But in the case of real estate, that doesn’t necessarily translate. In addition to this turbulent real estate market, stocks and investment portfolios have also been seeing a lot of volatility in recent months. “Even with the recent upward adjustments, mortgage rates are still at historic lows. When considering that after inflation, the true cost of money is significantly negative, this advice makes less sense,” says Cotton.

“Instead, take the funds that you might otherwise apply to extra or larger mortgage payments and pay into a good mutual fund index,” says Cotton. “You will have inflation eroding the face value of your mortgage while your monthly contributions will hopefully grow at a rate that exceeds that of inflation.”

Since Apartment Therapy isn’t in the business of supplying financial advice, you’ll want to speak with your financial advisor to discuss the best course of action for your investments and portfolio. But the idea is worth noting, especially in a rapidly changing financial world, where inflation is rising faster than ever, the housing market is anything but reliable, and the stock market is unpredictable. 



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