Pay off mortgage or make monthly payments and invest the rest?

[Ucsdryder]

A lot of us have mortgages with interest rates sub 4%. If you’re in that situation is there any reason to make additional payments toward the principal, or are you investing that cash with the expectation of earning a high percentage?

 

[mighteywhitehunter]

I dont know, I was just looking at adding $100-200 extra a month towards principal. I am @2.99% interest on my house. I am definitely not savvy with money so I will be following to see opinions on the matter.

 

[180ls1]

It likely won't make financial sense but may make emotional sense. This is dependent on your goals, risk tolerance employment stability and related.

People who retire with pensions, for example, are happier than those with market portfolios because of the perception of stability.

I am 36 and wouldn't touch it if you have stable w2 employment. Every dollar I invest now is $10ish at retirement.

 

[Pharmseller]

My wife and I made the decision to pay off the house vice investing. We did it for the emotional relief of outright ownership.

It’s not all dollars and cents.




P

 

[Ucsdryder]

It likely won't make financial sense but may make emotional sense. This is dependent on your goals, risk tolerance employment stability and related.

People who retire with pensions, for example, are happier than those with market portfolios because of the perception of stability.

I am 36 and wouldn't touch it if you have stable w2 employment. Every dollar I invest now is $10ish at retirement.

Yeah I’m in a similar spot. Sure would be nice to not have a mortgage but with 500k in equity at this point, when we do retire at some point in a couple decades we can downsize and own our home outright going into retirement.

 

[Ucsdryder]

My wife and I made the decision to pay off the house vice investing. We did it for the emotional relief of outright ownership.

It’s not all dollars and cents.




P

I bet it feels good to pay some monthly taxes and not have a few thousand a month going into the black hole!

 

[Maverick1]

Long-term better off financially to invest the money.

Short-term better off to have peace of mind no mortgage hanging over your head.
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[Pharmseller]

I bet it feels good to pay some monthly taxes and not have a few thousand a month going into the black hole!

You have no idea.

At the time both my wife and I were drug reps. The industry is very unstable and layoffs are frequent. Knowing the house was paid off was worth the lost opportunity.

Plus, I save the mortgage payment every month.




P

 

[StuckoYota99]

My goal is to have the house paid off by 2030. To make that happen I pay two extra monthly payments per year. I bought in 2015 with low rates.

 

[huntnful]

I’d invest it. Especially during this dip. About 5 years ago I had $260k and was going to outright pay off my house just for the peace of mind. I decided to put my feelings aside and just refi to a 15 year 2.25% interest loan and invested the whole lump sum into just a general index fund. It’s made well over $100k in those 5 years.

I’m also doing an additional $2k a month into the fund, that could easily just go to my mortgage. But it simply just doesn’t make sense. The market, in general, should outpaced the 2.25 interest pretty easily over time.

 

[sbaker0029]

I've got my mortgage set to pull out bimonthly payments which comes out to one extra month's principal payment in a years time. Might be something to look into doing if you're not already.

I'd invest and look into by bimonthly.

Maths vs Feelings

You're never truly free, you'll always have to pay taxes and insurance. Let the money from your investments pay those.

 

[menhaden_man]

I paid my house off at 42 years old. Also paid off our student loans, vehicle loans, etc. and pay for everything in cash. Maybe I would’ve done better investing that cash elsewhere but I sure is easy to live without having to cut monthly payments to a bank. Our quality of life is pretty damned good for a family of five.

Plus, it’s hard to feel comfortable with Monopoly money out in space these days… $36T in debt, doorstep of WWIII sure doesn’t help a guy feel comfy.

 

[Rokbar]

Pay it off. Its odd how over time peoples perception of home ownership has changed. But, so has mortgage rates. Growing up, people didn't use terms like equity. They didn't borrow EQUITY to remodel their house. They paid it off and got out of debt. I can see the investment side of it. But, like others have said, peace of mind is worth a lot. If you own your house out right (other than taxes), nobody can take it. On the investment side, I would worry about waking up one day, 401k is near zero, lay offed, and wondering how I'm going to pay the mortgage?

 

[180ls1]

I feel like it’s worth mentioning that investing in yourself / career almost always has the highest ROI. Not only does improving your skill set / standing usually = more money but it also adds job stability, that helps with both your “problems.”

If there is anything there you can invest in (certifications, networking, PR or related) I would thoroughly explore that first.

 

[Nykki]

We paid our home off early. Then invested the same amount a month into a brokerage account for the time the mortgage would have run. We both retired at fifty and our only payments are taxes and utilities. i will be 69 and the wife 72 this year. Pay cash for everything.

 

[bojangles808]

invest it

 

[jbosk15808]

Depends where your interest rate is, but you could find the middle ground of investing and extra payments by either using a high yield savings account to hold the payment/extra cash you planned on paying, or holding t bills. At least these options maintain liquidity should you need it.

 

[akn300wsm]

I do both. It probably doesn’t make the most sense, but I don’t want to be paying a mortgage for 30 years of my life.

 

[insanelupus]

Which one gives more peace?

The house you own instead of the bank?

Or

The money you probably/hope you will make in the future?

Once that question is answered for you and yours, you'll be able to decide.

 

[butcherboy]

If you can pay off your mortgage now I would do that then use the money that went to the mortgage every month for investments. If you can’t do it now then I would arrange it so you can make one or two extra mortgage payments a year that go straight to the principle instead of interest.