Saving for college vs paying off house
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Anonymous
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DH and I come from very different money backgrounds. My family has always had stocks and invested. His has always paid off their house (and didn't pay for college)
Every time I want to put more money into investments, we have a big discussion. He ALWAYS wants to put the money into our mortgage instead. Last night he was upset he learned I had been putting 4k in DD's 529 plan. He thought that 4k a year would be better put to our mortgage and then if we wanted to help her with college, our mortgage would be gone and we could help her more. FWIW our mortgage isn't THAT much (300k at 4%) and our salaries aren't high (180k) so we do have to make smart decisions about money. Is there something we could read or get information on what to do? I don't mind having a mortgage forever and he wants it to be our primary focus. We have 150k that I wanted to buy a rental property with, but he can't get over our huge mortgage balance and wants it paid off instead. I'm just sick of having the same discussion about paying off the mortgage over and over again. |
Anonymous
| I almost posted the same question earlier this week. I was recently talking money with my own dad and he said paying off the mortgage was his strategy for covering college and it worked out. It made me wonder if we should be putting that $$ we are now putting in a 529 toward paying off the mortgage before our DS gets college age. |
Anonymous
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Your husband sounds crazy.
Show him the actual dollars and cents on paper. I assume the $4k is for the state tax benefits? Show him that. Show him traditional growth of a home vs. growth of investment accounts over time. The mortgage rates are SO LOW and housing can never be thought of as a sound investment. I can't imagine the logic behind that kind of strategy. |
Anonymous
+1 It is insane to forgo saving for college in order to pay off a mortgage. I would add for your DH's info that paying for college is a completely different ballgame from what it was a few decades ago. It is virtually impossible for a student to "work her way through" as many people did back in the day. You should plan for doing more than "helping" her. IMO. https://www.theatlantic.com/education/archive/2014/04/the-myth-of-working-your-way-through-college/359735/ |
Anonymous
OP here. I have ran the numbers for him. I've shown him my return on my Vanguard account and that we should budget a 7% increase, but he just talks about paying off the mortgage. He keeps saying nothing will get us 4% interest every year (even though I show him we can do better). If anything, it's better to invest and then when we have a lump sum to pay off the mortgage, do that. We get nothing for paying on our mortgage early right now. Yes we're in VA and the 4k was for the state tax benefit. We paid off 80k of his student loans and he thinks it was easy and no big deal and that our kids should do the same. |
Anonymous
| Can you split 1/2? I can see logic in both approaches. We paid off mortgage first and it worked out fine for us. Knowing your home is completely paid for gives you tremendous peace of mind. |
Anonymous
OP here. We're 30, so we know about student loans. We paid it off in 5 years after graduation. He had 80k from college, but my parent's paid for mine. |
Anonymous
OP here. But is this financially the best strategy? I'd rather have a rental property before paying off the mortgage. |
Anonymous
He is selfish and ignorant. I would have a major issue with this. Major. On a HHI of $180K at this (early) point in your parenting, there is NO reason not to be saving aggressively for college. None. |
Anonymous
| Honestly, I'd sit down with some kind of financial planner. He/she will just echo your opinion about putting money into investments / 529s, but then it will come from a 3rd party "expert" so maybe your husband will be more receptive to the advice. |
Anonymous
Historically and mathematically speaking, no. Paying off mortgage gives you two upsides - 1) you are always moving forward (market - stock or real estate investments) can go down; and 2) peace of mind (important to some, not so for others). |
Anonymous
OP here. So you would put our 150k nest egg into the mortgage? (We owe 300k on the mortgage). I know it will shorten our mortgage in the future, but I'm having trouble doing it because I'm still paying the same interest right now. |
Anonymous
+1 I would add that if your HHI is $180 at 30yo, you are highly, highly unlikely to get any need-based aid for your children's higher education. This will mean loans for them in an amount far higher than $80K, such that their financial futures will be compromised. https://www.cnbc.com/2015/12/08/the-long-term-consequences-of-student-loans.html https://www.usnews.com/education/blogs/student-loan-ranger/articles/2016-01-20/study-student-loan-borrowers-delaying-other-life-decisions OP, you say "we" paid off your husband's large student loans. How would your DH have done at paying them off without you? What if your children don't marry? What if they marry people who have massive loans themselves and/or cannot afford to help? |
Anonymous
| Do you have a 15 or 30 year mortgage? Perhaps a middle ground is to make payments as if it is a 15 year while saving for college. There is no way I would drop 150k into your mortgage if I was you. None. Don't you track your investments? I have investments that have made 30+% this year alone. I think my int'l index funds are over 15%. 4% is peanuts. |
Anonymous
OP, I can't tell you where to put 150k but i'd strongly advise you against taking on another property (i.e., rental) and financially stretching yourself. You can get in trouble real fast once you start to bleed financially. Speaking from personal experience... The only reason we didn't lose our primary home is the fact it was paid off. Just my two cents. Good luck. |