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The reoccuring question.. should I pay off my mortgage?
Posted on 9/17/12 at 11:05 am
Posted on 9/17/12 at 11:05 am
I recently came into a good bit of change. Enough to pay off all debt, etc..
My mortgage is 4.6% and for the moment I'm only making about a .5% on the money while it sits until I invest it. I can't see not paying off the mortage unless I can make over 5% return once the money is invested. Event then I'm only profiting by .4%. I've already paid off all high interest debt such as CC debt, student loans, and one of my cars. The other is a lease which I'll leave alone as I trade it in every 2 years.
Would you pay it off?
My mortgage is 4.6% and for the moment I'm only making about a .5% on the money while it sits until I invest it. I can't see not paying off the mortage unless I can make over 5% return once the money is invested. Event then I'm only profiting by .4%. I've already paid off all high interest debt such as CC debt, student loans, and one of my cars. The other is a lease which I'll leave alone as I trade it in every 2 years.
Would you pay it off?
17
Posted on 9/17/12 at 11:12 am to LSUStjames
quote:
Would you pay it off?
Yes, never a bad decision to pay off your home. Yeah .4% doesn't seem like much but you'll have peace mind right?
This post was edited on 9/17/12 at 11:12 am
Posted on 9/17/12 at 11:12 am to LSUStjames
Depends on your age, how long you plan to continue working, and your investing abilities.
But in general, it's never a bad idea to pay your house off.
But in general, it's never a bad idea to pay your house off.
Posted on 9/17/12 at 11:20 am to LSUStjames
Consider a 15 year re-finance. I think the rates are well below 3% right now.
Find some good conservative dividend paying funds, REIT's, or something along those lines to invest your money.
Find some good conservative dividend paying funds, REIT's, or something along those lines to invest your money.
Posted on 9/17/12 at 11:21 am to LSUStjames
Outside of pure dollars, paying off your mortgage buys you lots of freedom and flexibility.
Posted on 9/17/12 at 12:34 pm to LSUStjames
pay it off, and put your monthly note into retirement and education accounts for your children
Posted on 9/17/12 at 12:41 pm to LSUStjames
No, I would not pay off my mortgage, but I don't know your current financial circumstances.
Google Ben Bernanke Refinance and see the report about how he, at 58, just refied to another 30 yr mtg. HE, being the lead banker, must know something that most people do not understand.
I would keep the big inheritance in a growth account and let it make the mortgage payment for me, while maintaining a deduction, and refi my current mortgage to the longest term I can, with the lowest monthly P & I payment.
Remember: Big dollars that compound create big dollars of gain. Small dollars that compound create small dollars of gain.
Google Ben Bernanke Refinance and see the report about how he, at 58, just refied to another 30 yr mtg. HE, being the lead banker, must know something that most people do not understand.
I would keep the big inheritance in a growth account and let it make the mortgage payment for me, while maintaining a deduction, and refi my current mortgage to the longest term I can, with the lowest monthly P & I payment.
Remember: Big dollars that compound create big dollars of gain. Small dollars that compound create small dollars of gain.
Posted on 9/17/12 at 1:15 pm to LSUStjames
you need to include tax deduction in your calculation
Posted on 9/17/12 at 1:23 pm to LSUStjames
quote:
Would you pay it off?
I once did that, then ended up going back and taking out a mortgage again. Rates are too cheap right now. 4.6 ain't bad, you should maybe look into investing opportunities that stay fairly liquid.
Posted on 9/17/12 at 3:02 pm to LSUStjames
I'd refi in to a 15 year loan and look for investment opportunities. 2.8% debt is really tough to beat.
Posted on 9/17/12 at 5:03 pm to LSUStjames
I just locked in a refi myself. I'm doing the 30 year, not the 15.
First off, the rate you're getting needs to take your tax deduction into account. So your after-tax rate isn't 4.6%, it's probably more like 3.5% and you can drop it further with a refi.
Second, with rates this low there isn't much difference between a 15 and 30. Taking inflation into account it is basically zero. Also, be aware that even though the rate on a 15 is slighly lower that means your return from paying more of it off each month is lower as well. You are probably even better off getting the 30 year and investing the difference.
Finally, I just don't get the whole "peace of mind" thing. Set up a monthly automatic deduction and forget about it. With rates like this you should mortgage as much as you can for as long as you can.
ETA: That is, provided you qualify for the best rates. If you don't then you will probably want to refi again once your credit is better.
First off, the rate you're getting needs to take your tax deduction into account. So your after-tax rate isn't 4.6%, it's probably more like 3.5% and you can drop it further with a refi.
Second, with rates this low there isn't much difference between a 15 and 30. Taking inflation into account it is basically zero. Also, be aware that even though the rate on a 15 is slighly lower that means your return from paying more of it off each month is lower as well. You are probably even better off getting the 30 year and investing the difference.
Finally, I just don't get the whole "peace of mind" thing. Set up a monthly automatic deduction and forget about it. With rates like this you should mortgage as much as you can for as long as you can.
ETA: That is, provided you qualify for the best rates. If you don't then you will probably want to refi again once your credit is better.
This post was edited on 9/17/12 at 5:05 pm
Posted on 9/17/12 at 5:06 pm to LSUStjames
On a related note, if you pay off the mortgage right now, then you are only getting a 3.5% after-tax return on your money. You could do worse but I bet you could do better.
Posted on 9/17/12 at 5:38 pm to LSUStjames
quote:13 years into a 30 year mortgahe we re-fied to a 15 year mortgage. Earlier this year, 5 years into that re-fi, we paid off the house entirely.
should I pay off my mortgage?
No regrets on our part. We're now considering buying another house to use as a rental property.
Posted on 9/17/12 at 8:48 pm to LSUStjames
Yes. Pay it off
Posted on 9/18/12 at 1:39 pm to LSUStjames
Pay it off. Best decision I ever made. Saved 1,000s. Money in the bank is worthless.
Posted on 9/19/12 at 8:13 am to LSUStjames
quote:
I recently came into a good bit of change. Enough to pay off all debt, etc..
This tells me nothing. Bottom line how much will it cost to pay your house off?
IF you pay it off how much money do you have left total? that you have in investments, savings? etc?
Posted on 9/21/12 at 10:56 am to LSUStjames
quote:
should I pay off my mortgage?
Pay it off, then promptly take out a HELOC with a good rate that you can draw on if ever needed. I can't help but think rates are going to skyrocket in the coming years, and you'll be in good shape if you have access to cheap money through the HELOC.
Posted on 9/23/12 at 10:17 am to LSUStjames
Without giving out too much info.. paying off the mortgage would represent using roughly 25% of the money. I would still have 75% to invest. I've already started looking at investments and a decision is still not made. I have spoken to 3 different financial planners and all 3 are suggesting to not pay it off for at least 3-5 years to let the principle build and see what inflation does. They've also recommended setting up a small draw off the investment interest to pay the note so I still would lose the bill.
I already have an emergencey account that represents 6 months of salary. My kids college should be completely taken care of through 529 accounts that get about 1k put into each monthly automatically, I don't even see it. The kids are 1 and 3. They will afford Stanford if they choose at that rate.
There is also a chance for another windfall in 2-3 years. And this was not an inheritance, much worse.
Forgot to add: My Tax Att recommends paying it off. The FP's make commission based off the amount I invest so it's in their best interest for me to invest it all.
I already have an emergencey account that represents 6 months of salary. My kids college should be completely taken care of through 529 accounts that get about 1k put into each monthly automatically, I don't even see it. The kids are 1 and 3. They will afford Stanford if they choose at that rate.
There is also a chance for another windfall in 2-3 years. And this was not an inheritance, much worse.
Forgot to add: My Tax Att recommends paying it off. The FP's make commission based off the amount I invest so it's in their best interest for me to invest it all.
This post was edited on 9/23/12 at 10:45 am
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