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

[MallardSX2]

Be debt free and have to work until you are 70 because you shorted yourself on your retirement savings.....

OR

Be able to retire 100% at 52 and live a great life.

The choice is easy for me. I just hope I live to enjoy my retirement. I will Invest and just pretend like the house payment doesn't exist until it is paid off....100%

 

[Natebonebusta]

2.937% on the mortgage, so I’m in no rush. I send the overage to investing, and based on the returns, it’s the right move.

I will note it’s aggravating to see your principal only drop $4,000 per year, but that subsides when your investment account jumps in tens of thousands.

Also I have comfort in knowing I can liquidate the investment accounts to satisfy the mortgage. That confidence gets greater every year.

 

[ozyclint]

Bitcoin baby. According the the Bitcoin thread you're nuts if you don't 'invest' in it.

 

[Snowhunter11]

S&P return was ~12.21 in the last ten years average annual. It’s hard to pay down your ~2.5% mortgage over ten years and lose those potential gains. However whatever helps you sleep at night.. some are risk adverse. To me certain funds such as the S&P 500 are the backbone of this country. If they all fail our dollar and your house is worth nothing. To me the risk is little. To some who lost 300k+ in value on their 401k the other day it may be a lot. I get a smile on my face when the markets crash because my new investments are buying low. However I am a believer in a better tomorrow. My 2c

 

[Macintosh]

Depends on if you have the mortgage deduction maxed out, doesnt it? Folks posting sound pretty well-off so Im guessing yes, but if not Id think since you are getting that interest back that itd be way smarter to invest it earlier.

 

[HornPorn]

This is being more complicated than necessary.

No debt is preferred to having debt. The end. Period. End of story.

----

I've lived with having my home (and a second vacation home/timber farm) completely paid off, and I've lived with having a mortgage payment. No brainer between which is a better situation.

Also, investing and paying off your mortgage off early do not have to be mutually exclusive.

 

[big44a4]

I’m in a similar boat with low mortgage rate and direction I’m going is maxing out both Roth IRA/401k then paying the rest towards my house. After house is done in the next 5 years I’ll open a traditional brokerage account and then invest all I can from what was going to house these years.

 

[go_deep]

I'm a huge proponent of being debt free.
No one ever thinks that the bad things will happen to them, but what if you can't go to work anymore, or at least do what you were doing making the income you had been, even for a few years?
Life happens.

 

[Reburn]

I would not pay off a mortgage or car that has an interest rate under a t-bill or CD.

But with that said I too fight the urge to pay off my house. I just remind myself that I would be wasting money.

 

[texag10]

I'm a huge proponent of being debt free.
No one ever thinks that the bad things will happen to them, but what if you can't go to work anymore, or at least do what you were doing making the income you had been, even for a few years?
Life happens.

Currently, I could have a paid off house (meaning I rent the right to live here from the state in the form of property taxes) and about $180k in non retirement account savings, or I could have a mortgage and $540k in non retirement account savings. Which gives me a longer runway to deal with unexpected issues like job loss?

Which (assuming investment) will result in my family having more wealth?

I work in financial planning, I've seen this easily thousands of times now. People that pay off low interest rate mortgages are usually reducing their long term net worth, and consequentially, their financial security.

 

[Marble]

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?

This will be highly contested...and for good reasons.

I will pay off my house. This will happen when my youngest graduates college in 4 years. At that point, I should have around 250k left on the mortgage. The house value at that time will be around 700k, or more, depending on the market.

It's on a 15-year, 2.7% loan. I co-own another home I paid cash for that will be sold when kids are done with college. We have no mortgage on that home. So I'll have plenty of cash and then some to pay it off.

I already have a pension I receive monthly, plus a multiple 6-figure salary.

I do not view the problem/solution as a math problem. I view it as a behavior. A behavior of paying cash and investing and eliminating debt/risk.

By the time I pay off the house, I should have over 1 million in my investment accounts, and I will be investing ~38k annually into a 401k.

I have had cancer three times and have discovered the freedom and flexibility of not having debt. Without the debt, it provides a lot of options for me to handle life's choices as my wife and I see fit.

I am a large supporter of Dave Ramseys' method and outlook on financial decisions. I look to the study where the average millionaire paid off their home in 11 years, or close to that.

I understand that investing the money has the potential for a substantial upside. I'm very well versed in investment strategies.

Sent from my SM-S918U using Tapatalk

 

[go_deep]

Currently, I could have a paid off house (meaning I rent the right to live here from the state in the form of property taxes) and about $180k in non retirement account savings, or I could have a mortgage and $540k in non retirement account savings. Which gives me a longer runway to deal with unexpected issues like job loss?

Which (assuming investment) will result in my family having more wealth?

I work in financial planning, I've seen this easily thousands of times now. People that pay off low interest rate mortgages are usually reducing their long term net worth, and consequentially, their financial security.

You do you.
But I would never in my life choose to keep debt when it could just be paid off and gone.

 

[Fowl Play]

Save up an emergency fund then invest. I would never pay off that mortgage. Not only is the rate less than treasury bills and many high yield savings right now, but inflation is also chipping away at the true “cost” of your mortgage the whole time.

 

[CRJR45]

We have a 2.87 percent mortgage on the house and split whatever extra we have , half on the house and half invested . The mortgage is our only debt .

 

[Sccritterkiller]

No way I would pay extra on loan under 3%. My current mortgage is 2.5% on 150k...My mortgage has been sold 3x in the last 4 years. I am waiting on the current bank to offer me a discount to payoff. They are loosing money servicing my loan and they have admitted it. The longer rates stay above 6% better chance I have.

 

[Grassymike]

As a Canadian it is a no brainer to pay off a mortgage ASAP. We do not enjoy the fixed rate 30 year terms common in the US. Our rates are locked in for a max of 7 years at a time with most going with 5 year terms. Interest is only fixed for the length of term ,meaning it could go up or down before you start the next term. Interest paid on a mortgage in canada is also not tax deductible, so there is extra incentive to pay down quicker.

 

[MuleyFever]

Ive gone back and forth with my wife on this. We have a 1.8% mortgage and she was making an extra $1000 payment every month. This reminds me I need to have the talk with her again and make sure she is still investing. She really likes to pay down debt. She got a new car last year and they offered financing at under 2%. I had to talk her into leaving the money in a CD paying almost 5%. She made it about 6 months and told me she paid off the car. She just couldn't handle it.

 

[Reburn]

No way I would pay extra on loan under 3%. My current mortgage is 2.5% on 150k...My mortgage has been sold 3x in the last 4 years. I am waiting on the current bank to offer me a discount to payoff. They are loosing money servicing my loan and they have admitted it. The longer rates stay above 6% better chance I have.

I have been sold 3 times as well on 400k 30yr fixed at 3%

 

[drdrop]

I would not pay off a mortgage or car that has an interest rate under a t-bill or CD.

But with that said I too fight the urge to pay off my house. I just remind myself that I would be wasting money.

THIS!

Basing financial decisions on feelings is for snowflakes. It shouldn't 'feel' safe to pay down a mortgage a little more when you can store that cash in a money market fund like VMFXX earning 4.23% with no risk. Say your mortgage is 3.0%, you're guaranteed to make over 1% more in your investments.

If a structural engineer or an accountant based their decisions on feelings rather than numbers, the world would be a scarier/more imprisoned place.

 

[Tahoe1305]

My 2 cents. If you can comfortably make more than 4% elsewhere you should not pay it off early.

You get a minor tax break if you are paying interest and your other deducible income items are greater than the standard deduction too (tougher these days but applicable for some).

As an example. I have a rental that is at 2.25%. We’ve had it for 16 years and owe very little on it at this point (maybe $50k). I used to take all the extra cash flow $2k+ a month and roll it back into the mortgage payment. When Covid happened and inflation started going up I stopped. In my mind I was wasting that money because I was crushing that 2% in the market (which was doing closer to 20% for those couple years). That money allowed me to still save a little while paying higher prices.

Loans aren’t bad things if you smartly use the money to make more money. It’s a slippery slope though.