Should I pay off the house under these circumstances?

[Anonymous]

Anonymous wrote:Can you swing it at $6k a month? I couldn't.

That is a key point I'd want to consider. However, they also must look at what their interest rate is. If it's 2.5/3%, they likely would end up paying the same or more if they bought a smaller home.

So I would continue paying at this rate, investigate selling/downsizing in a few years, as your kids are in college already. But I would not go very long on a $6K mortgage payment while only making $250K/year. Especially if that 250K is before any taxes are withheld/paid. If that is pretax, your mortgage is 1/3 or more of your take-home. That is high

[Anonymous]

Anonymous wrote:I would leave your mortgage and only sell what you need to cover the shortfall each year.

+1

Then figure out a plan for the future. Ideally, you should sell your current place and move to something more affordable/smaller, especially as your kids are in college and beyond. But that won't work until interest rates drop. Right now you'd be paying more/loosing money to do that

[Anonymous]

Anonymous wrote:You should pay off all of your debts and enjoy a debt free life.

Maybe you're being facetious, but for me, that's not bad advice.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I would leave your mortgage and only sell what you need to cover the shortfall each year.

This is what we are doing. DH was laid off at 60. Our HHI is now $175K, and our mortgage is $155K at 2.75% 15 yr fixed. The mortgage payment is about $1400 per month. Our mortgage interest last year was $4559.

If we have a large medical expense (which we have had in the past, and given our older ages, we may again), we will need the cash. Plus, I am not 100% sure about what will happen with my job now. So, we need the cash to live off of. The interest payment is tiny and doesn't really make much of a difference in our annual expenses.

This is the important thing. Do not put your cash in an illiquid investment like real estate.

[Anonymous]

If you want more money in the long run, obviously don't pay it off. You have 5 mil!

[Anonymous]

too many people are asking about this from the cashflow perspective but this is a savings question. OP is asking if they should use some of the 5M to pay off the 900k. Answer is no. You can make more in risk free investments than the interest on your mortgage. you're looking at minimum a 1% difference, really a bit more. That is 9k/year (simple math - its actually even higher) you make not paying it off.

[Anonymous]

Anonymous wrote:too many people are asking about this from the cashflow perspective but this is a savings question. OP is asking if they should use some of the 5M to pay off the 900k. Answer is no. You can make more in risk free investments than the interest on your mortgage. you're looking at minimum a 1% difference, really a bit more. That is 9k/year (simple math - its actually even higher) you make not paying it off.

Op here. Thanks. That's kind of been my point, but spouse is more risk adverse--meaning what is a risk free investment. Certainly not the stock market with the current nonsense we're going through.

Any thoughts?

[Anonymous]

Anonymous wrote:

Anonymous wrote:What kind of investments? Will you pay taxes if you use them?

OP here. Yes, they're taxed. Probably sell some stocks.

Use a calculator to figure out your capital gains tax so you don’t put that $$ in the house.

[Anonymous]

Anonymous wrote:HHI changed recently, down to $250/yr. Mortgage is $6k/mo, 2.5% fixed. Payoff amount is around $900k

Have investments of around $5m. Does it make sense to pay it off and not worry about monthly mortgage, or leave it alone since the interest rate is low? Spouse and I have different opinions, but both could be persuaded.

One kid in college, paying $35k all in. No other large expenses.

leave it alone. i'd sell enough to have cash to cover a year of the mortgage and college if you're worried about income dropping more. our income dropped from 400 to 250 with a similar mortgage, but we are not going to pay off such a low rate or move.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You should pay off all of your debts and enjoy a debt free life.

Maybe you're being facetious, but for me, that's not bad advice.

It's not bad advice for most people. Yes you can "make more investing" but as the last 3 months have demonstrated, you can also loose a lot. And most Americans simply do not have self control to not spend spend spend. So having no debt is freeing and allows you to enjoy life more.

However, I wouldn't pay off a mortgage until I had a 6-9 month emergency fund in cash/cash equivalents and I would continue funneling at least 75% of my old mortgage payments into savings each month.

[Anonymous]

Anonymous wrote:

Anonymous wrote:too many people are asking about this from the cashflow perspective but this is a savings question. OP is asking if they should use some of the 5M to pay off the 900k. Answer is no. You can make more in risk free investments than the interest on your mortgage. you're looking at minimum a 1% difference, really a bit more. That is 9k/year (simple math - its actually even higher) you make not paying it off.

Op here. Thanks. That's kind of been my point, but spouse is more risk adverse--meaning what is a risk free investment. Certainly not the stock market with the current nonsense we're going through.

Any thoughts?

It’s risk averse.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:too many people are asking about this from the cashflow perspective but this is a savings question. OP is asking if they should use some of the 5M to pay off the 900k. Answer is no. You can make more in risk free investments than the interest on your mortgage. you're looking at minimum a 1% difference, really a bit more. That is 9k/year (simple math - its actually even higher) you make not paying it off.

Op here. Thanks. That's kind of been my point, but spouse is more risk adverse--meaning what is a risk free investment. Certainly not the stock market with the current nonsense we're going through.

Any thoughts?

It’s risk averse.

Thanks, that's super helpful. I'm sure you've never mistyped anything while posting on an internet forum. Makes you wonder how I ended up with so much money, hunh?

[Anonymous]

This doesn’t have to be an either/or. You can hedge your bets and pay it down significantly thereby locking in the pay down so that you aren’t terribly affected if the market tanks.

[Anonymous]

It's ok to have debt at 2.5%.
I would concentrate on getting my kids into investing. Paying off the house would be the last thing on my mind.

[Anonymous]

You have $5million and an income of $250K. I wouldn't pay it back until interest rates on high yield savings accounts goes under 3%. Right now I am getting 4.4. If you are worried about stocks holding their value, make sure you have 3 years of expenses in a HYSA.