Paying off the morgatge, good or bad idea?
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Anonymous
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If you could pay off your mortgage, would you?
In our case we could pay 2/3 off now and the other 1/3 in about 3 years. After the 3 years we would save $900 per month by not paying principle and interest on the mortgage. Or we could continue paying the mortgage for 25 more years (or until we move) and take the money ($100 now and $75k more in 3 years) and invest that in index funds instead. The investing is my idea because the money is not tied up and the paying the mortgage is my husbands idea. I am worried about having all that money tied up in one thing (the house) exspecially reading about all the floods in the south and the lava fires in Hawaii and how insurance does not pay for these houses to be rebuilt. So which would you do? |
Anonymous
| Unless you have a ton leftover for emergencies like loss of job for years then I'd just pay extra each month vs. paying it all off. |
Anonymous
| Math wise it doesn’t make sense to payoff the house but the peace of mind is priceless. |
Anonymous
| It's about rate of return - if your mortgage is at 3%, but you can earn higher elsewhere, don't pay it off. Given equities have performed well over that I wouldn't. |
Anonymous
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Agreed--what's the mortgage interest rate? If it's under 4%, I wouldn't prioritize paying it off. Generally, I think it's good to diversify your investments, which means you don't want everything in the market or everything in the house.
Do you have retirement and college savings (if applicable)? Do you have an emergency fund? Those would both be higher priority than pre-paying the mortgage for me. |
Anonymous
| It's impossible to answer without knowing more about your financial situation |
Anonymous
+1. Mortgage interest is already tax advantaged if you're itemizing deductions, so it's one of best debts you can have. I would look at increasing your 401k contributions or 529 contributions to get more of your money in tax advantaged spaces before paying off the mortgage, and ensuring you have a good emergency fund for when various parts of your house break. Nobody's going to give you a 4% loan to fix a heat pump or leaky roof. |
Anonymous
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There is not a right or wrong answer in this scenario. You have to determine what your personal financial goals are and work to meet them. Either option can be considered right and both will put you in fantastic shape financially.
If you pay off the house and then take the old mortgage payment and invest it on top of what you already invest, you will be in extremely good shape depending on your retirement date. We need more info to properly advise you |
Anonymous
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we are in a similar situation, however we are not planning to pay it off but make a huge payment of 100k on a 400k 20 y mortgage. We already put a lot down when we bought the house 3 years ago.
We did the math: - mortgage is 400k left on 20 years with 3.75 interest rate - our saving account give us 2.2% interest, however we pay taxes on the gain, so it is not really 2.2% - We are maximizing retirement contribution - We have money left for emergency funds/repairs and other investment. my suggestion? pay 1/3 now and see how you feel about next year maybe you can pay another 1/3. - We like the idea off paying off mortgage soon since it is our biggest expense |
Anonymous
| Being debt free is priceless. Priceless. |
Anonymous
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OP, do you work? If so, how does your income compare to your husband's? Just wondering if he values paying it off more than you b/c he perhaps feels the "pressure" of knowing he has to bring in the income on a monthly basis. It may not be totally logical or the best thing to do, but I totally understand not wanting to have the monkey on his back.
This was our situation and we paid it off. Free and clear. Frankly, it worked out in our favor at least this past year b/c the stock market was a loss last year. So, in addition to paying the interest on the mortgage (had we not paid it off), the money we would have left in the market would have lost value. Apparently a lot of experts think there will be a recession in the next 2 yrs or so.... which means you may not earn that 6% you would hope to earn in the stock market. All of that aside, some people really value the mental freedom of not carrying debt. It works for us even if it is not maximizing our financial balance. There is still risk to investing. So, you have to do what you as a couple are most comfortable living with. |
Anonymous
Agree. The day I paid off my mortgage was wonderful. I felt so much better knowing I no longer had that debt. |
Anonymous
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+1000 on the peace of mind paying off the mortgage. Not to mention there is no guarantee to market returns, particularly 10 years into a bull market. There is always a balance though. It doesn’t have to be all or nothing. Maybe try to pay off 20% a year for the next 5 years or something.
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Anonymous
| Everyone that says paying off a mortgage is dumb, has a mortgage. The people that don’t have one say it’s a great thing, I’d listen to them. I’ll take money advice from people that don’t have bills over people that do. |
Anonymous
That literally makes no sense. You'd take advice from someone just because they paid off their house? You don't care what else they're invested in, or what kind of returns they've gotten? And who says all people who pay off their mortgage have no bills? They could just as well have a lot of credit card debt, or student loans. I'm not against paying off your home, but it doesn't make you some sort of financial savant. And even when you pay it off, you still have to pay property taxes, repairs and upkeep. It's not like it's $0 for the rest of your life. |