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Pay off your mortgage or pay off all debt other than the mortgage?
Posted on 6/12/19 at 12:51 pm
Posted on 6/12/19 at 12:51 pm
Suppose you were faced with the following two options. Which one do you go with and why?
1. Pay down your mortgage balance @ 3.5%
2. Pay off every bit of debt except the mortgage and pay cash for the new vehicle you need
I would be inclined to leave the mortgage balance alone and pay off all other debt since the mortgage rate is so low and most other interest rates are going to be higher.
1. Pay down your mortgage balance @ 3.5%
2. Pay off every bit of debt except the mortgage and pay cash for the new vehicle you need
I would be inclined to leave the mortgage balance alone and pay off all other debt since the mortgage rate is so low and most other interest rates are going to be higher.
This post was edited on 6/13/19 at 9:15 am
7
Posted on 6/12/19 at 12:52 pm to TDsngumbo
quote:
I would be inclined to leave the mortgage balance alone and pay off all other debt since the mortgage rate is so low and most other interest rates are going to be higher.
Well I sure hope so.
Posted on 6/12/19 at 1:00 pm to TDsngumbo
This is simply a math problem. Pay off the highest burdening debt first
Posted on 6/12/19 at 1:08 pm to TDsngumbo
quote:
pay cash for the new vehicle you need
Sigh...
Posted on 6/12/19 at 1:25 pm to TDsngumbo
Payoff all other debt. Your mortgage is tax deductible. The other debt carries higher rates of interest as well
Posted on 6/12/19 at 1:28 pm to TDsngumbo
quote:
1. Pay off half your mortgage balance @ 3.5%
Absolutely not.
quote:
2. Pay off every bit of debt except the mortgage and pay cash for the new vehicle you need
I would cut out your highest debt then go from there. I would definitely not pay cash for a new vehicle.
What about #3? Pay your other debts depending on the rate, and invest the rest for a better return on your dollar?
Posted on 6/12/19 at 1:38 pm to HailToTheChiz
quote:
What about #3? Pay your other debts depending on the rate, and invest the rest for a better return on your dollar?
This.
Personally, I'd Pay off anything above 5% interest (depending on how conservative you want to be). Finance the car you NEED (not want) assuming the interest is low as well. Invest the remainder.
ETA: If you have to pick between 1 and 2... go with #2.
This post was edited on 6/12/19 at 1:39 pm
Posted on 6/12/19 at 2:43 pm to kennypowers816
This
and
this
New vehicles can be outrageously expensive nowadays. Somewhat stemming from the "housing bubble thread", people complain about the high prices of real estate nowadays, but they certainly don't mind dropping $60,000 on that brand new Yukon, or $85,000 on that brand new Land Cruiser.
In short, if you need a car, just be reasonable about the purchase. There are lots of options and styles to pick and choose from.
quote:
. I would definitely not pay cash for a new vehicle.
and
this
quote:
Finance the car you NEED (not want)
New vehicles can be outrageously expensive nowadays. Somewhat stemming from the "housing bubble thread", people complain about the high prices of real estate nowadays, but they certainly don't mind dropping $60,000 on that brand new Yukon, or $85,000 on that brand new Land Cruiser.
In short, if you need a car, just be reasonable about the purchase. There are lots of options and styles to pick and choose from.
Posted on 6/12/19 at 2:58 pm to GentleJackJones
quote:
In short, if you need a car, just be reasonable about the purchase. There are lots of options and styles to pick and choose from.
Oh I agree. It's just the the wife and I need to upgrade from a sedan to an SUV soon. I'd love to get a brand new SUV but chances are we're going to probably go with a slightly used Pilot or 4Runner. Maybe even Santa Fe.
Posted on 6/12/19 at 8:58 pm to TDsngumbo
Leave your mortgage as you can write that off. Pay off the other stuff.
Posted on 6/13/19 at 8:38 am to EveryoneGetsATrophy
quote:
Leave your mortgage as you can write that off. Pay off the other stuff.
For many, this is no longer the case.....just saying. This probably isn't great general advice to just throw at everyone anymore.
Posted on 6/13/19 at 9:01 am to notsince98
Even so, paying of half the mortgage doesn't change the monthly payment on it. Paying off the debt eliminates those payments, lowers you dti, likely increases your credit score and frees up money to make principal payments on the mortgage
Posted on 6/13/19 at 9:36 am to MontyFranklyn
quote:
Even so, paying of half the mortgage doesn't change the monthly payment on it. Paying off the debt eliminates those payments, lowers you dti, likely increases your credit score and frees up money to make principal payments on the mortgage
Exactly. Paying off all other debt gives you the month-to-month flexibility to pay more on the mortgage, or not, as your other obligations/goals are met. Of course, this requires sticking to a budget and not simply acquiring a new pile of debt.
Posted on 6/13/19 at 10:35 am to TDsngumbo
TD's... I have a great solution. Listen to what these guys have said so far because it's all good advice.
More importantly, get back to the OT and do what you do best! Putting together awesome NSFW threads!
More importantly, get back to the OT and do what you do best! Putting together awesome NSFW threads!
Posted on 6/13/19 at 10:42 am to MontyFranklyn
quote:
Even so, paying of half the mortgage doesn't change the monthly payment on it.
That is not always true. Recast/re-amortization does allow you to do just that. Not every mortgage lender offers that option but it is an option I require on every mortgage that I will ever have. You make a bulk principle payment and then they re-amortize the balance over the remaining life of the loan to reduce the monthly payment.
This post was edited on 6/13/19 at 10:44 am
Posted on 6/13/19 at 2:25 pm to notsince98
And a recast costs about $100. Just not many people know about it.
Posted on 6/13/19 at 2:28 pm to GentleJackJones
quote:
Sigh
What is wrong with paying cash for a new vehicle? It feels great not having a car payment each month.
This post was edited on 6/13/19 at 2:32 pm
Posted on 6/13/19 at 2:30 pm to kennypowers816
quote:
Personally, I'd Pay off anything above 5% interest (depending on how conservative you want to be). Finance the car you NEED (not want) assuming the interest is low as well. Invest the remainder.
I think most of this sounds good on paper but ignores human behavior.
Finance and pay interest on a depreciating item like a car?
This post was edited on 6/13/19 at 2:49 pm
Posted on 6/13/19 at 3:02 pm to weagle99
quote:
I think most of this sounds good on paper but ignores human behavior.
You're absolutely right. It assumes that OP can control him/herself and not spiral out of control into debt. That is the general expectation of this board.
quote:
Finance and pay interest on a depreciating item like a car?
What does a car being a "depreciating item" have to do with any of this?
If you pay for it with cash or if you finance it, the car is going to be worth the same amount a year from now. You may be under water on the loan but you have money in corresponding investments to cover it. Assuming you didn't spend the money on something else, the net value of your car +/- your investments will be the same, excluding interest lost on a loan or (un)realized gains/losses on the corresponding investments.
Posted on 6/13/19 at 3:15 pm to kennypowers816
quote:
That is the general expectation of this board.
Might be the expectation but someone, somewhere is accounting for the trillions of consumer debt in the US and I don’t expect this board is exempt.
quote:
you possibly have money in corresponding investments to cover it
FIFY
I don’t plan to ever have a car payment again.
A middle ground might be to save towards the purchase so that you can pay cash but invest the money along the way and keep any gains beyond the vehicle cost in the investment account.
This post was edited on 6/13/19 at 3:20 pm
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