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

It can be a hard pill to swallow when non-financial factors are worked into financial decision making. You’ll be ok.

Other non financial factors could be what companies do for or against issues you’re passionate about. If company A kills a large number of aardvarks making widgets and company B making identical long term returns doesn’t kill any, you might make a non financial decision based on if you like aardvarks or not.

Many guys do all the investment planning if their spouse can make heads or tails of it or not. It only works because they understand it well. Step in front of a bus, and the odds of the surviving spouse figuring things out isn’t guaranteed.
I am not worried about being ok. I really don’t value your opinion enough to make me worried about swallowing anything.

I post this stuff because people read it and can then make a choice on what to do with their financial choices. Getting both side of the coin only helps them.

I grew up with the pay off your debt, don’t go into debt, etc. and that way of thinking has cost me hundred of thousands of dollars in my short life. I don’t want someone else to fall into the same trap of only thinking there is one way.
 
As I mentioned above, anyone who made it through the Great Recession knew multiple people and business that lost most of their assets. I knew people that lost their cars, any toys and most of their assets, but owning their house often made the difference between remaining in a neighborhood and rebuilding, or being forced to move to the poor side of town with a much more severe climb out of the bad situation. It was living in their home vs renting an apartment with a roommate.

As normal you are generalizing. Nobody you are speaking of had 3% fixed 30 year mortgages. Nobody you are speaking of had the liquidity to pay off their house in cash.

Many people had this happen because they bought the variable rate mortgage sales pitch hook line and sinker without understanding how money works.
 
Can you tell me what the S&P is going to do over the next 15 years, then I can math it.
It’s going to go up and down with the overall trend of more up than down.

Mark the date and time. In 15 years, if I am not correct that it is overall higher than what it is today, I will Venmo you 50 bucks. What do I get if I am correct though?
 
I am not worried about being ok. I really don’t value your opinion enough to make me worried.

I post this stuff because people read it and can then make a choice on what to do with their financial choices. Getting both side of the coin only helps them. I grew up with the pay off your debt, don’t go into debt, etc. and that way of thinking has cost me hundred of thousands of dollars in my short life. I don’t want someone else to fall into the same trap of only thinking there is one way.

This is actually kinda funny because he is right (in his own mind) as he seems to believe we are arguing for maximum leverage without regard for risk at all times along with other wild positions. Which, correctly, is a stupid position.

However, reading comprehension has got the better of him as none of us are presenting that argument lol.
 
Can you tell me what the S&P is going to do over the next 15 years, then I can math it.

Take the 30 year Compound annual growth rate of 10.56% and drop 2% off to be conservative growth of 8.56%
Worth noting this is just a bit over historical inflation so your not actually "making" much but you arent losing.

I dont bet on our economy failing so if the SP500 tanks we as a nation have bigger problems.
 
As someone who has paid off the house and getting ready to sell our paid off house. we will have earned a 45% ROI in just 5 years. With the house paid off my wife and I were able to put more into retirement as well. In the long run not having a house payment will be more beneficial since one’s cost of living should be less during retirement.
 
Mortgage company calls it bimonthly, twice a month. Payments on 3rd and 23rd.
My monthly payment was split in half to be paid on those two days. Results in 24 payments a year.

Biweekly payments would result in 26 payments a year.

Bimonthly can mean both twice a month or every two months. Darn English language lol

So if you are making 24 half payments, or 12 full payments, how does that result in one extra monthly payment a year?

You would have to be paying half your mortgage payment every 2 weeks for this to work. 52/2=26 half payments or 13 full payments.
 
Well, please tell us what we should do math with then.
If you have enough money sitting around to pay off your mortgage, then calculate what your net money market rate will be after taxes -vs- your net mortgage rate after calculating tax deductions on the interest..........and compare the two. If your net MM rate exceeds your net mortgage rate, then keep your MM and keep paying your mortgage. If vice-versa (your mortgage is costing more than you're making on the cash), then pay off your mortgage.
 
As someone who has paid off the house and getting ready to sell our paid off house. we will have earned a 45% ROI in just 5 years. With the house paid off my wife and I were able to put more into retirement as well. In the long run not having a house payment will be more beneficial since one’s cost of living should be less during retirement.
So just to provide an investment comparison. The ROI in the S&P 500 over the same time frame (last 5 years) was 89% (that is including the recent 18% dip btw).

If that was a $200k payoff (for example) that’s ~$100k that was left on the table given actual 5 year data. Plus loss in tax write offs (call it potentially a few more thousand a year).

Edit: furthermore if the ROI you are referring to is your home (it went up 45% in value over the last 5 years), then that still holds true if you invested it and didn’t pay down the mortgage…..only you leveraged the bank’s money to earn that 45% ROI AND still made 89% in the market for the money you used to pay off.
 
So if you are making 24 half payments, or 12 full payments, how does that result in one extra monthly payment a year?

You would have to be paying half your mortgage payment every 2 weeks for this to work. 52/2=26 half payments or 13 full payments.
Last time I checked there is 4.2 weeks in a month. Only 12 months in a year. Adds up to two additional payments in a 365 day period (year).
 
Last time I checked there is 4.2 weeks in a month. Only 12 months in a year. Adds up to two additional payments in a 365 day period (year).
If you pay on the 3 and 23 of each month, that’s only 24 payments a year.

You have to set it up to pay every two weeks. This allows you to pick up the addition 2 payments a year, to bring it to 26 payments.

Only paying twice a month doesn’t allow you to pick up the two months that you pay three times.
 
All my mortgages are here in Alberta. Did bi- weekly payments on all of them. Here that was 26 payments a year. Not sure how it works where you live.
 
All of this depends on your current financial situation and what stage of life you're in.
I have a 30 yr fixed at 2.65% after we renovated the house and put $400k into it. I could make $500-750k if I put it on the market today in a matter of 48 hours depending on the bidding war that would go on given our current housing market. This is not our final home as our family is growing.

In my situation, it is better for me to pay the low rate as is and take all "MY MONEY" leftover filling up 401ks, IRAs, kids' 529s, HSA and S&P 500 stocks. Reinvest the dividends for the stock, as well as the stock my kids have. The borrowed money doesn't matter to me as long as the note is paid. Investments will outpace and set us up for better retirement. My wife and I are both 38, good health and I have no intention of betting against myself.

To each their own. Consult with a Fiduciary, get a good accountant, work hard and give thanks to God. You'll be ok.
 
Want to explain the math on that for me?

Mortgage paid off, we have $180k in bank and brokerage accounts and $3800/mo of expenses. (47 months of runway)

Not paying off mortgage, we have $540k in bank and brokerage accounts and $6000/mo of expenses. (90 months of runway)

Assuming I don't have an event that requires me to use savings, and I can invest either 180k + $2200/mo, or $540k with no additions (over simplistic, we are still saving) at 7% annual rate of return:

Pay off mortgage, then invest the payment would leave me with $3327210 at my mortgage maturity date in 28 years. Invest and continue to pay is $3590373 in 28 years.

I intentionally assumed a lower rate of return that historical averages for my asset mix AND did not assume a refi from my current rate of 6.375 for that 28 years. Both of these create a headwind for my position and I still have more runway and higher net worth over time.
You are overthinking it.

Why do you need money, now or in the future? Why does anyone need money?

The biggest bill in most households that aren't cooking meth is mortgage/rent payment.

I guarantee you if 99.9% of people lost their job today, their biggest concern is losing their home/living situation......NOT oh no, now I can't invest as much for that day that I hope I'm alive 30 years from now.
 
I admit I haven't read all 7 pages of this.

The mathematically correct answer is to invest the money, especially if the mortgage rate is lower than the US Treasury risk free rate (as is likely for a lot of people now).

That said, investing is saving. Paying off the mortgage early is saving. One is a bit more efficient, but what matters is saving. Increasing your saving rate by like 1% is a bigger deal than this choice.
 
All my mortgages are here in Alberta. Did bi- weekly payments on all of them. Here that was 26 payments a year. Not sure how it works where you live.
Probably the same. Biweekly is not the same as bimonthly. Bimonthly is generally seen as twice a month.

Paying two payments a month is not the same as paying a payment every two weeks. Every two weeks equates out to make three payments in a month twice in a year. Only paying twice a month means you only pay twice a month, that three in a couple.

It’s an easy thing to get confused. Many people do but it’s not the same thing.
 
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