A nice problem to have

[Anonymous]

Anonymous wrote:

Anonymous wrote:Paying off a mortgage sounds good but it's actually not.

We did ours and it was great.

This is just so incredibly stupid.

We have over $6 million in investments and a $600,000 mortgage at an interest rate that’s even lower than OP’s. We could literally pay the mortgage off tomorrow. Are you seriously advising us that that would be “great?”

[Anonymous]

Anonymous wrote:We don’t know enough about your finances yet. Are all three of the 529s fully funded? Meaning enough for state school - multiple in state costs times four and make sure you have enough in the 529s first. I guarantee if you have to take out ones for college, the interest rate will be more than 3%

Op here. We will have enough for 4 years of instate tuition + some expenses (but not total room and board). For each kid. My theory is that w/o a mortgage and all the kid expenses (travel teams). We will be able to handle room and board out of pocket.

[Anonymous]

Generally you don't want to pay your mortgage off faster, because the length of time you agreed to in the beginning determined the amount of interest you were ordered to include in your payments. Banks cleverly make you pay the bulk of the interest in the first payments. If you are able to pay the whole thing off down the road, there isn't much benefit, given that later payments tend to be mostly principal. Essentially, paying your mortgage off faster means you're not benefiting from the right you paid for to pay it slower. You're not using any leverage the new lump of money could have given you if you invested it in the stock market, or elsewhere. I hope that makes sense...

On the other hand, Trump 2.0 may not be a great time to invest in the stock market, even though it looks great at times, because with unpredictable tariff decisions, it's hard to know in which company to invest. You could place the money in a general fund, if you believe the market will rise, without getting bogged down into details.

As others have pointed out, an immediate use for your money would be ensure your children's college funds are ready to go. And that's where we get into questions of financial aid, whether you're eligible for it, and which vehicle could shield your new-found money from financial aid calculators. Retirement accounts are not taken into account for federal FAFSA calculations of aid, and *rarely* taken into account for the CSS, which is the form for private colleges. However the CSS is more demanding than the FAFSA, and looks at the value of your primary home and grandparent-owned 529s, whereas the FAFSA does not. If you think you may be eligible for aid of any sort, you might want to do your research before accepting this new money into any of your accounts.

[Anonymous]

^ and they definitely both look at total assets, including brokerage accounts!

[Anonymous]

Anonymous wrote:

Anonymous wrote:You know yourself best. If keeping that much $$ is going to tempt you into spending habits that you don't want, then paying off your mortgage is the smarter choice.

You could pay off your mortgage then set up an automatic monthly transfer of an amount just under your old mortgage payment into to an investment account. And then don't touch that account until you really need it.

Op here. That’s a great option - my plan would be to push the old mortgage payment into the 529s.

This is not a good idea -- do NOT pay off a mortgage under 3%. First, do a backdoor Roth and make sure college is funded -- if not, fund a 529 WITH the money you are receiving, not with your monthly income after paying off the mortgage. Also, take a great trip. Then invest the remainder of your windfall in a low-cost index fund. If you get the urge to spend it, know that if you sell <1 year, you'll have to pay short-term capital gains (your income tax rate). If you sell >1 year, you pay long-term capital gains, i.e., much less in taxes. Let that be your motivation to keep it in the market.

[Anonymous]

Anonymous wrote:This is a no-brainer. You do not pay off the mortgage. That is a very middle class way of thinking.

The rich don't have mortgages my friend. There is plenty of $$. No need to scrimp. You have a poor mans mentality.

[Anonymous]

I would want to make sure the mortgage was comfortably affordable in the event of a job loss or major illness for one spouse. But otherwise at 3% I would keep it.

My thinking is that there’s a good chance a big income problem that made the mortgage a problem would coincide with a drop in the market and the housing market too. So I would want to make sure I wouldn’t be forced to liquidate anything quickly to cover the mortgage. But that wouldn’t necessarily mean taking it to zero.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is a no-brainer. You do not pay off the mortgage. That is a very middle class way of thinking.

The rich don't have mortgages my friend. There is plenty of $$. No need to scrimp. You have a poor mans mentality.

That's actually not true at all. Most of the very wealthy love debt and have mortgages on their properties even though they are literally worth billions. Now, they have the benefit of a place like the old First Republic that as an example provided Zuckerberg with a 2% mortgage (when rates were like 3.5%) because they use it as a loss leader to get all their other business.

[Anonymous]

I would keep it in investments and not pay off mortgage. That is what we did and it helped give us choices later on. When we got within a year of paying off our mortgage, we did it. If you can, (at least in your head) you can earmark some of it for college costs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is a no-brainer. You do not pay off the mortgage. That is a very middle class way of thinking.

The rich don't have mortgages my friend. There is plenty of $$. No need to scrimp. You have a poor mans mentality.

LOL. The rich love to buy, borrow, die.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You know yourself best. If keeping that much $$ is going to tempt you into spending habits that you don't want, then paying off your mortgage is the smarter choice.

You could pay off your mortgage then set up an automatic monthly transfer of an amount just under your old mortgage payment into to an investment account. And then don't touch that account until you really need it.

Op here. That’s a great option - my plan would be to push the old mortgage payment into the 529s.

So, from one bad decision to another. If this is not a life-changing money for you, make it into life-changing money.
This money is probably enough to build generational wealth and fund retirement tax free for 3 kids. Don't put it into 529 to die.

[Anonymous]

Do not pay off a 3% mortgage when Sallie Mae has a 4.4% 15-month CD and Etrade has 4.2% for 5 years. If you are extremely risk-averse, just put all the money in something insured like this. You'll have it for college, future mortgage payments, emergencies, etc. Or you could invest a portion and save the rest. Don't forget to do something meaningful with the windfall--donate some to charity, take a family trip, or the like.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is a no-brainer. You do not pay off the mortgage. That is a very middle class way of thinking.

The rich don't have mortgages my friend. There is plenty of $$. No need to scrimp. You have a poor mans mentality.

The rich have mortgages from when they were available at 3% or less. And they are in no rush to pay them off.

I have a 3% loan. Why would I give extra money to my bank as a mortgage payment and have them lend it to someone else at 5-6%, when I could instead give it to them in a high-yield checking account or CD and have them pay me 4-5%? The latter is more money and more liquidity for me.

[Anonymous]

IF risk adverse could by a muni bond yielding 5 percent tax free and use that to pay off mortgage with interest payments and pocket the 2 percent spread

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is a no-brainer. You do not pay off the mortgage. That is a very middle class way of thinking.

The rich don't have mortgages my friend. There is plenty of $$. No need to scrimp. You have a poor mans mentality.

The rich have mortgages from when they were available at 3% or less. And they are in no rush to pay them off.

I have a 3% loan. Why would I give extra money to my bank as a mortgage payment and have them lend it to someone else at 5-6%, when I could instead give it to them in a high-yield checking account or CD and have them pay me 4-5%? The latter is more money and more liquidity for me.

By them you mean us. There is no Them. My mortgage is owned by Freddie Mac which I in turn own as an American tax payer along with you.