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

Short answer is that it depends. I always do 15 year vs 30 year mortgages, but regardless assuming you have a low rate and are on track to pay off before retirement I would look at priorities in this order.

1. Max out tax advantaged accounts (401k, IRA, 529 if you have kids, health savings accounts)
2. Emergency fund roughly 1 year of expenses split evenly between a HYSA and invested in a taxable brokerage
3. Pay off all non-mortgage debt
4. Then decide on paying off mortgage or investing more in taxable accounts, I personally would tend to split this - so if I had an extra $2k per month per month put half toward the mortgage and half toward investment. If I had a 30 year mortgage I would skew the ratio that way. I might also look at what the market it doing, if its nearing all time highs put money toward the mortgage, if its dipping put it in the market
 
Our mortgage is below 4% and I basically round up for payments, so pay small extra amounts each month. $2130 becomes $2200. I'm not sure why I do that. Just feels like a small way of getting ahead. We plan to retire in 2037 (age 55) and our mortgage hits year 30 in 2040, so will have to eventually figure out how to pay it off early but it's not a priority right now. Also need to figure out what to live on age 55 to 59.5 as most of our retirement assets are locked up in 401ks.
 
Our mortgage is below 4% and I basically round up for payments, so pay small extra amounts each month. $2130 becomes $2200. I'm not sure why I do that. Just feels like a small way of getting ahead. We plan to retire in 2037 (age 55) and our mortgage hits year 30 in 2040, so will have to eventually figure out how to pay it off early but it's not a priority right now. Also need to figure out what to live on age 55 to 59.5 as most of our retirement assets are locked up in 401ks.
Your round up will cover those 3 years.

You can also take principle out of a 401k with no penalty, there is a bit more too it than that but its fairly simple.
 
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.

There was a nice thread about this very decision back then if I recall correctly!
 
Your round up will cover those 3 years.

You can also take principle out of a 401k with no penalty, there is a bit more too it than that but its fairly simple.

Do you know of good tool to figure out how far ahead we are? Like input rate, principal payment due, balance, etc?

I should have said most of our assets are rolled over 401k's now in traditional IRA's. I know there are workarounds but I bet the rules change 5 times before now and 2037. Right now we are just stashing nuts in any hole that will take them with a tax advantage.
 
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.

I see this misstated a lot. I think you mean bi-weekly?
 
A few years back we paid off our 15 year mortgage. The rate wasn't high, though I forget the number, mid 3%s maybe? We paid it off. It was a weird feeling not having a mortgage in my mid 30s at the time. It's an awesome feeling though. When we moved to our current home, we got a small mortgage to cover some remodeling and stuff. Rate on this one is 6.875%. I've been throwing extra at it. Should have it gone in 3 years. Hit all the other important stuff first like retirement and kids college. One can justify spending every dollar they have right now(most do). Or they can justify saving every dime for a future that may not come. I think there's plenty of room for balance.
 
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?
It's simply a question of what's your risk tolerance. I saw a lot of people in 08 almost lose everything because of their leverage and layoffs. They lost their arses selling depressed securities to make home payments

You can't time the market. Sub 4% is a great rate but its till leveraged money. If this was a second home or investment property I'd leave it. You home is a long-term asset, but a necessity, life's a lot less stress full when you are only beholden to property taxes. I've been 100% debt free since 30. My ability to gamble on investments is much greater than anyone heavily debt leveraged. Stress of a 3-4% historic gain over home interest not counting ST or LT gains isn't worth it to me.
 
Depends on current 100% safe investment rate vs. Mortgage interest rate. Some guys like the feeling of having a paid off house, I like the feeling of knowing any day I can choose to pay off my mortgage when it makes financial sense.

Even if you pay your house off, it still is not your house. Try not paying property taxes. Sucks that a guy will never truly own his house.
 
You do you.
But I would never in my life choose to keep debt when it could just be paid off and gone.
You didn't answer the questions. Why would I take an action that gives me less runway in the event of job loss and leads to my family having less money?
 
Our mortgage is below 4% and I basically round up for payments, so pay small extra amounts each month. $2130 becomes $2200. I'm not sure why I do that. Just feels like a small way of getting ahead. We plan to retire in 2037 (age 55) and our mortgage hits year 30 in 2040, so will have to eventually figure out how to pay it off early but it's not a priority right now. Also need to figure out what to live on age 55 to 59.5 as most of our retirement assets are locked up in 401ks.

This is what we do. We pay an extra $160 a month which adds up to just over one extra payment. We are changing cell service and that extra will also go toward principal and be an extra payment over the year.

This is a great thread and it seems a lot of people are in the same boat. My wife is also a no debt queen and in fact of all the people we know (other than you fellas on RS) are the only people who have no debt other than the mortgage. If/when it comes up with folks people think we are filthy rich. I’m like, no, we just live modestly.

Our mortgage is 3.3% and we play with the payoff/paydown calculator a lot. One of our thoughts is to pay a chunk into the mortgage, get it restated, but continue to pay our normal amount to reduce the true amount due each month in the event we needed to direct cash elsewhere. Also, like someone mentioned above, my wife has had cancer and the idea of waiting waiting waiting for a carrot and the good life that may or may not be there is a tough juggle.
 
Do you know of good tool to figure out how far ahead we are? Like input rate, principal payment due, balance, etc?

I should have said most of our assets are rolled over 401k's now in traditional IRA's. I know there are workarounds but I bet the rules change 5 times before now and 2037. Right now we are just stashing nuts in any hole that will take them with a tax advantage.
I dont know of one offhand but I could whip up something in excel pretty quickly that would be pretty close to right. Generally speaking extra payments early make a huge difference though.

Doing super quick and dirty math a 30 year loan on $445k with 4% interest compounding monthly and paying at 2130 per month pays off in 30 years. Rounding up to $2200 takes 22 months off of the loan. Make it $2300 and it takes 4 years off of the loan. Changing interest rates by even 1/10s of a point makes a big difference as well.
 
Short answer is that it depends. I always do 15 year vs 30 year mortgages, but regardless assuming you have a low rate and are on track to pay off before retirement I would look at priorities in this order.

1. Max out tax advantaged accounts (401k, IRA, 529 if you have kids, health savings accounts)
2. Emergency fund roughly 1 year of expenses split evenly between a HYSA and invested in a taxable brokerage
3. Pay off all non-mortgage debt
4. Then decide on paying off mortgage or investing more in taxable accounts, I personally would tend to split this - so if I had an extra $2k per month per month put half toward the mortgage and half toward investment. If I had a 30 year mortgage I would skew the ratio that way. I might also look at what the market it doing, if its nearing all time highs put money toward the mortgage, if its dipping put it in the market
I back your plan here. The compounding interest for longer term is where I would put my money first. Can't put a price on peace of mind for paying off house but investing makes sense in the long run. And the rate definitely makes a difference. Lower rate then for sure invest
 
Sub 4 percent, I would make the minimum and invest the rest. Pretty easy to at least double that in the stock market each year. (Yes, I know that it has its ups and downs)

We have a 4.9 and I am not worried about making extra payments.

Its a little harder today but CDs, HYSA and Tbills are paying high 3s to low 4s. If your interest rate is below that, you can take anything you would pay extra and put it there. Let it gain interest, making you money and in the event that something happens, you can just use it to make the payment in the future. Literally, the worst thing that can happen is that you use the money that you would have used to pay extra on your mortgage, to pay your mortgage.
 
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