If you were to inherit $2 million, would you pay off the remaining $150k of your very low interest mortgage?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

We used to be self employed (contractors) and always have at least a year's worth of expenses, including the mortgage payment. I also lived through two recessions, and the mortgage meltdown. So I've learned to be very conservative with my savings.

If your income is irregular, you want to have a huge cushion to pay your monthly bills. If you use that $150K to pay off your low interest mortgage, and you lose your contract, you might not have a mortgage to worry about, but you also have $150K less to pay your other expenses.

I would put that cushion into a safe, low risk investment account like a money market.

Copied this response I posted earlier and gonna paste it every time someone makes the stupid argument above:

“OMG, you people are absurd. If this is your mindset, you should never have bought a house in the first place – think of how many years of potential expenses you are giving up by making that $180K down payment.

Oh, and everyone should always have a car payment—you want to keep that $30K liquid in the event that you’re laid off! GMAFB, you weirdos.”

[Anonymous]

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Wouldn’t paying off the mortgage mean you couldn’t keep the full inheritance in the case of divorce (and if you die first it might be trickier to have the money go directly to your kids if that is what you want). I am not that worried about divorce, but if I die first I want my inheritance in a trust for my kids that is controlled by my brother. That way my husband can remarry and not worry about his new wife trying to get that money. I am keeping the money very separate for that reason.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Wouldn’t paying off the mortgage mean you couldn’t keep the full inheritance in the case of divorce (and if you die first it might be trickier to have the money go directly to your kids if that is what you want). I am not that worried about divorce, but if I die first I want my inheritance in a trust for my kids that is controlled by my brother. That way my husband can remarry and not worry about his new wife trying to get that money. I am keeping the money very separate for that reason.

That's a good point for discussion. An aspect that hasn't been considered up to now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Wouldn’t paying off the mortgage mean you couldn’t keep the full inheritance in the case of divorce (and if you die first it might be trickier to have the money go directly to your kids if that is what you want). I am not that worried about divorce, but if I die first I want my inheritance in a trust for my kids that is controlled by my brother. That way my husband can remarry and not worry about his new wife trying to get that money. I am keeping the money very separate for that reason.

That's a good point for discussion. An aspect that hasn't been considered up to now.

It's $150k out of $2 million. Just pay it off and stop worrying about every penny.

[Anonymous]

If you are down to 150K it is nearly all principal anyhow.

My mortgage I actually got a low rate in 2017 as put a lot down and had good credit so did not refinance.

Already in 2025 just 8 years later you see each month Principal becoming a larger and larger part of each monthly payment meaning the low interest rate is worth less and less each month.

Right now banks still have CDs higher my interest rate. But if interest rates fall again I might as well just pay it off at some point.

My mortgage is at 3.6 percent.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Wouldn’t paying off the mortgage mean you couldn’t keep the full inheritance in the case of divorce (and if you die first it might be trickier to have the money go directly to your kids if that is what you want). I am not that worried about divorce, but if I die first I want my inheritance in a trust for my kids that is controlled by my brother. That way my husband can remarry and not worry about his new wife trying to get that money. I am keeping the money very separate for that reason.

You should divorce now if you don't trust your husband.

[Anonymous]

Anonymous wrote:If you are down to 150K it is nearly all principal anyhow.

My mortgage I actually got a low rate in 2017 as put a lot down and had good credit so did not refinance.

Already in 2025 just 8 years later you see each month Principal becoming a larger and larger part of each monthly payment meaning the low interest rate is worth less and less each month.

Right now banks still have CDs higher my interest rate. But if interest rates fall again I might as well just pay it off at some point.

My mortgage is at 3.6 percent.

That's not a low mortgage. I would pay off the balance so then you can invest after its paid off.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you are down to 150K it is nearly all principal anyhow.

My mortgage I actually got a low rate in 2017 as put a lot down and had good credit so did not refinance.

Already in 2025 just 8 years later you see each month Principal becoming a larger and larger part of each monthly payment meaning the low interest rate is worth less and less each month.

Right now banks still have CDs higher my interest rate. But if interest rates fall again I might as well just pay it off at some point.

My mortgage is at 3.6 percent.

That's not a low mortgage. I would pay off the balance so then you can invest after its paid off.

Pay it down and recast.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Wouldn’t paying off the mortgage mean you couldn’t keep the full inheritance in the case of divorce (and if you die first it might be trickier to have the money go directly to your kids if that is what you want). I am not that worried about divorce, but if I die first I want my inheritance in a trust for my kids that is controlled by my brother. That way my husband can remarry and not worry about his new wife trying to get that money. I am keeping the money very separate for that reason.

You should divorce now if you don't trust your husband.

I trust my husband but crazy things happen. He could develop dementia in 20 years and someone could take advantage of him. Other things could happen. Many people keep inheritance money separator that reason.

[Anonymous]

If you can earn at a higher rate than your interest rate on your mortgage, then invest your money and don’t rush to pay off the mortgage.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If you are down to 150K it is nearly all principal anyhow.

My mortgage I actually got a low rate in 2017 as put a lot down and had good credit so did not refinance.

Already in 2025 just 8 years later you see each month Principal becoming a larger and larger part of each monthly payment meaning the low interest rate is worth less and less each month.

Right now banks still have CDs higher my interest rate. But if interest rates fall again I might as well just pay it off at some point.

My mortgage is at 3.6 percent.

That's not a low mortgage. I would pay off the balance so then you can invest after its paid off.

Pay it down and recast.

It is a Freddie loan and they dont do recasting. I rather just pay off mortgage then take monthly payment amount and put it into stocks each month and dollar cost average in. Or just make a lump sum towards principal to speed up final pay off. I did 140K towards it in 2021 that pulled my 2047 mortgage pay off to a 2037 mortgage pay off. If CD rates fall again I will just as they roll over knock down the mortgage bit by bit.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:DH and I inherited $3M in 2021 after having just refinanced our $750K mortgage into a 2.4% 30-year fixed. We donated half of it to charity (as I assume you did as well, OP), which left us with $1.5M. We used half of that to pay off our mortgage so that we have no debt of any kind. The remaining $750K was invested in the stock market and we now have almost $3M again…plus no debt and the satisfaction of having donated $1.5M to help those less fortunate than us.

DP but yeah, uh, no. If I receive a potentially life-changing inheritance, it's going to be used to...actually change my life and that of my family. Especially if I still have a mortgage!

I honestly don't understand charity. I do know for sure that once I've achieved financial independence, I wouldn't continue the same meaningless job in the financial industry and could very well end up working in some low-paid endeavor in which I strongly believe. But that's totally different from giving up half of the money that would actually give me the independence.

Ironic that you’re willing to accept a gift but you aren’t willing to give one to someone else. It’s called greed and it’s one of the seven deadly sins: congrats!! Your talk of financial independence sounds strikingly similar to not wanting to work. That’s called sloth and now you’re 2 for 7.

Guess we can thank people like you for everything that is wrong in our society.

What a crazy comment!
My mom and dad worked hard to leave me an inheritance, should I now give a big chunk of it away? Why can't I leave what was left to me to my child so she can have a good life?

Agree with PP who inherited. No way I'm giving away a dime of inheritance to charity. My taxes pay for social programs, that's it. No more.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can someone ELI5 why it would be bad to pay off your mortgage, in this scenario at least? We are self-employed with irregular income and not having a mortgage sounds like a dream.

And maybe also teach me how to turn money into more money, because we are looking at a similar windfall at some point in the future…

Wouldn’t paying off the mortgage mean you couldn’t keep the full inheritance in the case of divorce (and if you die first it might be trickier to have the money go directly to your kids if that is what you want). I am not that worried about divorce, but if I die first I want my inheritance in a trust for my kids that is controlled by my brother. That way my husband can remarry and not worry about his new wife trying to get that money. I am keeping the money very separate for that reason.

You should divorce now if you don't trust your husband.

I trust my husband but crazy things happen. He could develop dementia in 20 years and someone could take advantage of him. Other things could happen. Many people keep inheritance money separator that reason.

Hey you don't have to justify anything you are correct. That money is yours I don't care if you have been married for 100 years. Keep it separate. YOU-NEVER-KNOW. He could leave you for a much younger woman and take with him half that inheritance.

I wish we men had the same prudent mindset that women have.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes, we didn't inherit and paid off our mortgage. Its freeing.

Exactly.

If put the amount left on the mortgage in a HYSA that makes 1.25% more than my mortgage, set it on autopay, and forget about it (unless I need he cash), how is that any less freeing?

Because if your mortgage is switched to a different servicer and you don't get the memo, it could go into default while your autopay is merrily humming along.

If you are too lazy and stupid to manage mortgage payments, you deserve to stay poor.

[Anonymous]

Paying off a mortgage is only freeing if you overspent on your house and the mortgage is a burden. My mortgage isn’t a burden. I could pay off the balance if I needed to. My life insurance from my employer would cover it. It’s an absolute pleasure to pay my mortgage every month because it’s only 2.75% and the asset is worth 40% more than I paid for it.

On the other hand, if I didn’t have a large amount of assets and the mortgage was a large % of my take home, I’d be pretty nervous.

That’s why I bought a house well under my means.

If you inherit 2M, your remaining mortgage is not a major factor. I see no reason to give up a small amount of very affordable leverage. Use your 2M to begin compounding and just take on appropriate risk with the right asset mix.