RetireJapan

I have a fixed 20 years house loan for 0.85 %. I have never had a loan before so I was very allergic to the thought of having a loan and wanted to pay it back as soon as possible.
But, I was also wondering about NISA and the opportunity cost of not investing into NISA.
So if you woke up as me and could pay your mortgage early or invest into NISA what would you do?

Its a personal decision so its hard for us to say. You can't put a price on peace of mind so if paying it off makes you feel better then by all means go do it. We hope to get 5% growth on index investing every year which should outpace your mortgage interest rate but thats not a guarantee so you should do what makes you feel better.

It depends on your age, your current investments, your salary and earning potential, what pensions you expect to receive, etc etc.

I have a mortgage and prioritize investing for retirement more than paying it off early. That works for me.

invest in NISA! And iDECO if eligible!

If you pay down your loan:

1. You're paying yourself a return on that money equal to the interest rate on your loan - 0.85% - Well it's marginally better than a Japanese Bank Deposit... on a Depreciating Asset in Japan...

2. The outstanding balance is covered by Life Insurance - if you use your money to pay down the loan, and you die, your family will have the house free and clear, but if you put the money into NISA and you die, your family will have the house free and clear AND your NISA Portfolio.

3. If you fall on hard times, the bank will not give you credit for having payed down the loan faster in the past... They will still demand payment, but if you put the money into NISA, in the worst case you will be able to liquidate the NISA to pay the loan payments...

4. If you are receiving the Mortgage Tax Relief for the first 10 years, you receive more tax relief if the balance is higher... If you pay down the loan, the outstanding balance goes down, and so the Mortgage Tax Relief based on the outstanding balance goes down...


Don't listen to Dave Ramsey! Not for Home Loan in Japan @ 0.85% !
Do listen to Dave Ramsey on paying down other High Interest Consumer Debt!

https://www.youtube.com/shorts/l6RTTshiDsw

https://www.youtube.com/watch?v=w3z0vVEVT_s&t=66s

Oliver wrote: ↑Thu Nov 23, 2023 1:03 pm I have a fixed 20 years house loan for 0.85 %. I have never had a loan before so I was very allergic to the thought of having a loan and wanted to pay it back as soon as possible.
But, I was also wondering about NISA and the opportunity cost of not investing into NISA.
So if you woke up as me and could pay your mortgage early or invest into NISA what would you do?

I also have a fixed rate mortgage loan with about 2 decades left, and circa 1% interest rate is pretty cheap; I have done early repayments so far, but am no longer in a hurry. Pretty sure that putting the money into equity investments for 2 decades will do way better than circa 1%, especially in yen terms (of course, if Japanese policy changes my bets are off… but that’s where I’m at now)

Tkydon wrote: ↑Thu Nov 23, 2023 2:09 pm invest in NISA! And iDECO if eligible!

If you pay down your loan:

1. You're paying yourself a return on that money equal to the interest rate on your loan - 0.85% - Well it's marginally better than a Japanese Bank Deposit...

2. The outstanding balance is covered by Life Insurance - if you use your money to pay down the loan, and you die, your family will have the house free and clear, but if you put the money into NISA and you die, your family will have the house free and clear AND your NISA Portfolio.

3. If you fall on hard times, the bank will not give you credit for having payed down the loan faster in the past... They will still demand payment, but if you put the money into NISA, in the worst case you will be able to liquidate the NISA to pay the loan payments...

4. If you are receiving the Mortgage Tax Relief for the first 10 years, you receive more tax relief if the balance is higher... If you pay down the loan, the outstanding balance goes down, and so the Mortgage Tax Relief based on the outstanding balance goes down...


Don't listen to Dave Ramsey! Not for Home Loan in Japan @ 0.85% !
Do listen to Dave Ramsey on paying down other High Interest Consumer Debt!

https://www.youtube.com/shorts/l6RTTshiDsw

https://www.youtube.com/watch?v=w3z0vVEVT_s&t=66s

Absolutely this.
If your interest on the loan is less than the return on your savings, then SAVINGS wins. If the Interest on the loan is higher than the return on your IDECO NISA. then PAYING your debt down wins.

REMEMBER the IDECO contributions also give you a small city tax benefit too and can be paid out on certain disabilities or dies. Put all the money into the house and you have nothing...the bank has it. Plus you can maybe retire at 60.

Thank you everyone. My mind is at rest. I will invest into NISA instead of paying my house off quickly.

https://www.youtube.com/watch?v=J2ZC9ZBZA3s

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