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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 11:14 am to LSU0358
NOOOO....you can make more money than the interest payments you will save. If you are going to put it in the bank or similar...pay it 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 2:07 pm to BestBanker
quote:
HE, being the lead banker, must know something that most people do not understand.
I think that "something" is the likelihood that people taking out fixed rate mortgages today will be seen as having gotten free money once inflation goes up to +5% in a few years.
If my mortgage were in the mid 4% range I probably wouldn't pay it off personally. It's cheap and like yellowfin said, you get the tax deduction for interest. But i also see the utility in paying it off.
I think this is a personal preference call.
This post was edited on 9/17/12 at 2:09 pm
Posted on 9/17/12 at 2:41 pm to ZereauxSum
quote:
I think that "something" is the likelihood that people taking out fixed rate mortgages today will be seen as having gotten free money once inflation goes up to +5% in a few years.
Bingo.
I am trying to find ways to take out debt right now.
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 6:26 am to Brian Wilson
Pay it off- the peace and sense of security is priceless
You never know what tomorrow holds
You never know what tomorrow holds
Posted on 9/18/12 at 7:55 am to 756
quote:
you never know what tomorrow holds
No intent to insult follows:
If your statement ( and others say the same) is true, then why wouuld you put money into the mortgage payoff versus keeping a large, safe stash somewhere?
Rational thought demands an understanding that if the "tomorrow" you refer to, arrives, and you have no mortgage but have no loose money, what good is the house? You can't eat it. You can't take it with you when you must move to another location to survive the effects of the "tomorrow".
Emotion should play little role in financial desicion-making.
Posted on 9/18/12 at 8:25 am to BestBanker
quote:
what good is the house?
quote:
why wouuld you put money into the mortgage payoff versus keeping a large, safe stash somewhere?
The house would be paid for. Which would free up any money to be used elsewhere. I would much rather have a paid off mortgage than a fat stack of cash.
Pay off the home and then build the stash back up, all while not having a mortgage payment. You'd be surprised at how fast you can save/invest when you don't have monthly payments. I've done exactly that and the feeling of completely owning my home is one that cannot be replaced.
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