Pay off mortgage to indie-hack?
Imagine you inherit a lump sum or win the lottery. The money is enough to pay off your mortgage or if you're renting you'd be able to buy a house/apartment in cash.
Normally people will compare paying off a mortgage (reduce risk?) vs. investing the money (higher monetary return?).
Indie hackers are a little different to the general population, and lowering fixed monthly costs could extend the runway significantly and lower the threshold of success.
If my indie hacking project(s) seemed to have some real business potential, I would certainly bring any/all monthly expenses down to focus on them. I don't think I would do it just to give me space to indie hack on new ideas.
If I received a huge amount of money, then, first of all, I would pay off the mortgage and buy myself a new car. And also I would buy all my relatives one house or car, it already depends on the amount I receive. You have no idea how much I suffered from getting a mortgage, so for me paying a mortgage is task number 1. After all, about a year ago, I tried to get a mortgage but could not do it in any way because the bank thought that I would not be able to pay it. And I had to ask for help from specialists from this firm -- Mortgage Advisor Newcastle ( https://Newcastlemoneyman.com ). The mortgage adviser could help convince the bank to give me a mortgage. And after a long time of proceedings, I still got a mortgage, and now I have my favorite job and house.
There are different ways to look at money. These options compare cash flow and net worth. Paying off your mortgage optimizes for cash flow (which could give you more short-term options), and investing and keeping the mortgage optimizes for net worth. Keeping your monthly expenses low does reduce your risk, but more importantly it just makes the "How am I going to make this work financially?" math much easier.
Very good point, and well put. Thinking of it as optimization of either cash-flow or net-worth makes a lot of sense.
What would you do if you only had to pick one?
Since we're in Sweden the mortgage rate is so god damned low you can invest that money and pay of the mortgage indefinitely with the returns on that investment. That's what I would do. Unless you're at an expensive mortgage threshold, then I'd pay it down to that threshold and then invest the rest.
Would you keep pulling money out of the investment at an economic downturn and/or rise of interest rates... or would you up your consulting?
I know mathematically the investing route is probably the right thing to do over a long time-period. On the other hand, removing the risk-aspect from interest rates and investment returns for the time period of indie-hacking should make "paying your bills" much more predictable at least when taking on such a large risk as going full indie is.
Indie hacking + investment + mortgage = 3 things you need to get lucky/right
Indie hacking only = 1 thing you need to get right
Does this spark any change in how you think about it?
That's an interesting thought yes.
I'd say both the mortgage and buying funds are investments. And I think we're overdue for a stock correction. But that said I still think I'd lock in the mortgage rate 1-2 years and bet safe. Maybe do a 50/50 split of the investment.
The thing about risk like this is that the worst case scenario ends you up at your current state. So why not take the long view?
Yes, because a significant part of why I want to do this IH journey is that I dream of having more autonomy over my life. Paying off my mortgage buys me freedom in that I reduce the number required to pay my bills.
Having more money in the future is not in my opinion worth saying no to "becoming free" now.
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