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Started By
Message
Is it smart to pay off house?
Posted on 3/9/14 at 7:37 am
Posted on 3/9/14 at 7:37 am
So, I will be coming into about $115K (wife's Uncle's estate) this year. We are trying to figure out what we should do with it.
We owe right around $95K on our house. We are living comfortably - I mean paying off our monthly mortgage right now is not a big deal.
However, in a few years we are wanting to move to another town (Chicago 'burbs) because they have much better schools for my son.
So that's my issue. Should I pay off my house now and enjoy saving more money, or should I save it for a few years (in a money market acct) and use it as a down payment / renovations to a new house?
What say you?
We owe right around $95K on our house. We are living comfortably - I mean paying off our monthly mortgage right now is not a big deal.
However, in a few years we are wanting to move to another town (Chicago 'burbs) because they have much better schools for my son.
So that's my issue. Should I pay off my house now and enjoy saving more money, or should I save it for a few years (in a money market acct) and use it as a down payment / renovations to a new house?
What say you?
This post was edited on 3/9/14 at 7:52 am
3
Posted on 3/9/14 at 7:43 am to LSU_Cubs
quote:
What say you?
Two questions I have a feeling will come up...
1) Are you paying PMI?
2) What is your current interest rate?
In my mind it would come down to $$$ spending on interest/pmi vs what you could make on investing it.
Secondly, if the first question is irrelevant, I don't know of any advantages when selling to have a house paid off??? With a car, I can see having the title in hand as a benefit, but not with a house.
I could be 100% wrong though. The smart people aren't awake yet.
Posted on 3/9/14 at 7:49 am to Lsut81
quote:
I don't know of any advantages when selling to have a house paid off???
That's the first thing I told my wife when she posed the questions. I can't think of anything either.
PMI - Yes
Rate - 4.25ish
This post was edited on 3/9/14 at 7:50 am
Posted on 3/9/14 at 8:20 am to LSU_Cubs
quote:
PMI - Yes
Pay enough so that you have the equity to stop paying PMI.
quote:
Rate - 4.25ish
Eh, I probably wouldn't. Depending on your tax bracket, your rate after taking the tax break into account hovers near the rate of inflation. Not worth it IMHO.
Any time you can borrow at the rate of inflation, you are actually paying nothing for the cash. I was lucky enough to refi my place for 30 years at 3.25% a year ago, which is even lower. I look forward to taking the full 30 years to pay it off. I wish I could take longer.
Posted on 3/9/14 at 8:20 am to LSU_Cubs
What would you do with the money if you didn't pay off your house?
What would you do with the money you pay monthly on your house note now if you didn't have to pay it?
Pro/Con the answers to those two questions out and you should have a really clear idea about which answer is the right one.
Keep it simple, brah.
What would you do with the money you pay monthly on your house note now if you didn't have to pay it?
Pro/Con the answers to those two questions out and you should have a really clear idea about which answer is the right one.
Keep it simple, brah.
Posted on 3/9/14 at 8:33 am to foshizzle
quote:
Is it smart to pay off house? quote: PMI - Yes Pay enough so that you have the equity to stop paying PMI. quote: Rate - 4.25ish Eh, I probably wouldn't. Depending on your tax bracket, your rate after taking the tax break into account hovers near the rate of inflation. Not worth it IMHO. Any time you can borrow at the rate of inflation, you are actually paying nothing for the cash. I was lucky enough to refi my place for 30 years at 3.25% a year ago, which is even lower. I look forward to taking the full 30 years to pay it off. I wish I could take longer.
This is the correct answer
Posted on 3/9/14 at 8:58 am to foshizzle
Between your advice and gfunk's questions posed...I think I'm going to do what I originally thought we would do...stand pat and put our money into something else and watch it grow till we are ready to buy in a few years
Posted on 3/9/14 at 9:01 am to LSU_Cubs
quote:
PMI - Yes
I'd pay the amount down needed to relieve yourself of PMI and then put the money in an investment account...
You should easily be able to draw more than 4.25% from a Mutual Fund.
Posted on 3/9/14 at 9:50 pm to LSU_Cubs
Paying off the house is the conservative thing to do. The chance that you lose your job/company goes under/you die and the wife cannot recover your life insurance/you get sick/etc etc etc, the house would be paid off. There's no risk of losing it to the bank. Or, invest the 115k and "throw the dice".
Good luck and congrats on the wind fall!
Good luck and congrats on the wind fall!
Posted on 3/9/14 at 11:12 pm to Lsut81
quote:tax consequence? Won't he owe tax on any interest income?
You should easily be able to draw more than 4.25% from a Mutual Fund.
Posted on 3/9/14 at 11:28 pm to Fast_Eddie
I agree with Fast Eddie. Paying off your house at 4.5% interest guarantees you a return of 4.5% (minus the mortgage interest deduction but still including your property tax deduction). The market is doing very well right now, and it may continue to go up and up for several years. But it might not. And considering you want to cash out for a new house in the near future, you cannot afford the chance of a downward market blip. Just pay off the house.
Posted on 3/9/14 at 11:45 pm to LSU_Cubs
I'm a 2.8
I'm paying as slow as I can. I may regret it if the bear market everyone around here predicts comes true.
I'm paying as slow as I can. I may regret it if the bear market everyone around here predicts comes true.
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