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

[Dos Perros]

Here is the part I don’t understand.

If I have 100,000 debt costing me 3% and I have 100,000 sitting in the bank earning me 5%. How do I have more peace of mind not having the debt?

Yea, I have debt but I have the ability to facilitate every penny of that debt.

People are wired differently, and people have different needs. I don't know how many times it has to be said before it's understood.

 

[CorbLand]

People are wired differently, and people have different needs. I don't know how many times it has to be said before it's understood.

Probably about as many times as it needs to be said that people that invested their extra payments in near zero risk avenues didn’t lose their house because it wasn’t paid off.

Or

That nobody here is advising anyone to leverage themselves to the top of their hair to make the interest rate spread.

 

[Sccritterkiller]

If he actually itemizes. Lots of people dont now that standard deductions are so high.

If your under 3% even if you have a jumbo mortgage gonna take a lot more of deductions to get above 30k joint stndar deduction.

 

[Yoder]

You will never regret paying off your house but I would pay off all my other debts before paying extra on my mortgage.

 

[go_deep]

Talk to a financial advisor. Everyone has different goals, incomes, debts, etc. and everyone is at different stages of life.


Sent from my iPhone using Tapatalk

I'll add interview several financial advisors before you choose one to work with.

 

[Thinkingman]

Without question, let the mortgage ride.
The time value of money in the market has overwhelmingly provided the best return.
Plus, you are leveraged in your home at 2.99%.
Your house will appreciate at the same rate whether you are 100% invested or just the downpayment.
I was 30 years in the investment industry and absolutely stand by my strategy...Real investment, not insurance or other BS.

 

[cowdisciple]

I'll add interview several financial advisors before you choose one to work with.

The problem is, if you're someone who doesn't feel confident assessing who's right in the various perspectives on this thread, how are you going to evaluate the services provided by a financial advisor? (I have this problem whenever I need an auto mechanic).

If you feel you must do this, get a flat fee only advisor and be certain they have a fiduciary duty to you. If they don't, they're getting paid in a way that you may not understand and very likely is not in your best interests.

 

[DougR67]

Without question, let the mortgage ride.
The time value of money in the market has overwhelmingly provided the best return.
Plus, you are leveraged in your home at 2.99%.
Your house will appreciate at the same rate whether you are 100% invested or just the downpayment.
I was 30 years in the investment industry and absolutely stand by my strategy...Real investment, not insurance or other BS.

The average stock market return is about 10%. If your investments aren't making you better than 4% on average, you need a to look for a new advisor.

 

[Sccritterkiller]

There are bidding wars in South Carolina?

Look at state growth rates...SC has been in the top 10 for a few years, migh av the highest growth rate on the east coast, Yankees relocating and Halg backs..Yankee that move to FL, dont like it and move half way back for the "seasons" raw land for residential is 65k an acre areound me..
My home has appreciated 250% since we bought in '09. I couldn't afford to buy the house I live in now today...I am 3 hrs from the beach...thats the hottest market in the state.

 

[CorbLand]

Look at state growth rates...SC has been in the top 10 for a few years, migh av the highest growth rate on the east coast, Yankees relocating and Halg backs..Yankee that move to FL, dont like it and move half way back for the "seasons" raw land for residential is 65k an acre areound me..
My home has appreciated 250% since we bought in '09. I couldn't afford to buy the house I live in now today...I am 3 hrs from the beach...thats the hottest market in the state.

That’s crazy. It’s mellowed out here. Prices have increased a little in the last year or so and houses are selling still but it’s not bidding wars. At least that’s what I have been told.

 

[bowhuntercoop]

Look at state growth rates...SC has been in the top 10 for a few years, migh av the highest growth rate on the east coast, Yankees relocating and Halg backs..Yankee that move to FL, dont like it and move half way back for the "seasons" raw land for residential is 65k an acre areound me..
My home has appreciated 250% since we bought in '09. I couldn't afford to buy the house I live in now today...I am 3 hrs from the beach...thats the hottest market in the state.

You must be in the up state by me.

No way I could buy my farm today compared to 2021. Land prices alone have gone bonkers in the last 10 years around here honestly.

 

[Natebonebusta]

Look at state growth rates...SC has been in the top 10 for a few years, migh av the highest growth rate on the east coast, Yankees relocating and Halg backs..Yankee that move to FL, dont like it and move half way back for the "seasons" raw land for residential is 65k an acre areound me..
My home has appreciated 250% since we bought in '09. I couldn't afford to buy the house I live in now today...I am 3 hrs from the beach...thats the hottest market in the state.

I’m in the exact same boat, but in NC. Being priced out of where you grew up, is a hard pill to swallow.

 

[SDHNTR]

Lqaa as

@KyleR1985 to use another example if you are truly interested.

We just moved to crazy expensive CO for work and purchased. Our rate isn’t horrible at 6% but not great (my first home in 2005 was 6.15%….so this isn’t the worst rate obviously).

In my market, if I wanted to rent I’d eat $1000 a month currently (negative cash flow). However “assuming” these houses appreciate in the near term (they will), and if I factored in the tax write offs of renting, I’d still be ahead today.

I also bought this house to live in and rent in the future for that reason. There were better options to just buy and rent (lower income housing make better rentals….middle income is what I try and target).

My personal strategy is to buy, live in, fix up, then rent when I want to upgrade to something nicer. I don’t want to deal with the stress of having too many rentals at my age.

Do you have a family?

 

[Beendare]

I'm seeing a lot of Dave Ramsey references. Overall, I think his advice is oversimplified.

DR makes some good points especially when it comes to 'No Credit Card Debt'. Thats in the range of 21%- 28% interest rate that literally kills you.

It's not as simple as pay off a 3% loan and make 4.5% on that money. You have to factor in how much you make in income and what that mortgage deduction saves you- it's different for everyone.

Ramsey's advice of, "No Debt" doesn't factor in a lot of things. He tailors his advice to an average working stiff that is not savvy about their investment options.

 

[Tahoe1305]

Lqaa as

Do you have a family?

I do.

 

[Tahoe1305]

I'm seeing a lot of Dave Ramsey references. Overall, I think his advice is oversimplified.

DR makes some good points especially when it comes to 'No Credit Card Debt'. Thats in the range of 21%- 28% interest rate that literally kills you.

It's not as simple as pay off a 3% loan and make 4.5% on that money. You have to factor in how much you make in income and what that mortgage deduction saves you- it's different for everyone.

Ramsey's advice of, "No Debt" doesn't factor in a lot of things. He tailors his advice to an average working stiff that is not savvy about their investment options.

I am conflicted at times with what he preaches too. Oversimplified is a good way to state it.

I also think he’s preaching to the average person who may or may not have the discipline to execute a more risky strategy.

He’s info is solid, but does leave cash on the table in trade for peace of mind.

 

[Beendare]

I also think he’s preaching to the average person who may or may not have the discipline to execute a more risky strategy.

He’s info is solid, but does leave cash on the table in trade for peace of mind.

There is a big difference when it comes to eliminating CC debt at 21%-28% and a 3% mortgage that you, 1) can write off your income and pay less tax, and 2) make more money on your money in a CD.

If it's an 8% mortgage, then it's a different story.

Rentals; I have rentals and it's more labor intense but I use it as diversification and inflation protection with a steady income stream. If you think Property managers will solve the hassle for you, it comes at a big cost to the investment.

IMO, One of the best options for owning a Rental is to keep the house you are currently in with a locked in low mortgage and tax payment, convert that to a rental and buy another house. It's not as good now as it was with low mortgage rates but in many areas it still pencils out.

You have to run the numbers but in many cases it's a big positive cash differential over the expenses for the property.

 

[cowdisciple]

There is a big difference when it comes to eliminating CC debt at 21%-28% and a 3% mortgage that you, 1) can write off your income and pay less tax, and 2) make more money on your money in a CD.

If it's an 8% mortgage, then it's a different story.

Rentals; I have rentals and it's more labor intense but I use it as diversification and inflation protection with a steady income stream. If you think Property managers will solve the hassle for you, it comes at a big cost to the investment.

IMO, One of the best options for owning a Rental is to keep the house you are currently in with a locked in low mortgage and tax payment, convert that to a rental and buy another house. It's not as good now as it was with low mortgage rates but in many areas it still pencils out.

You have to run the numbers but in many cases it's a big positive cash differential over the expenses for the property.

Either that or build/buy a property with a separate, attached ADU and rent that. Makes things easier if you really aren't that excited about being a property manager, because you have only one rental and it's easy to keep an eye on it when it's attached to your house. The ADU attached to my house is what made it pencil out to begin with.

 

[HornPorn]

For this conversation, it would be great to have each poster's net worth and age listed alongside their opinion.

It's akin to 50 financial advisors posting advice to a reddit question, but not being able to tell who just got their S7 at Edward Jones and is knocking on doors, and who has $300M AUM across 20 or so clients and turns people down regularly.

 

[Tahoe1305]

For this conversation, it would be great to have each poster's net worth and age listed alongside their opinion.

It's akin to 50 financial advisors posting advice to a reddit question, but not being able to tell who just got their S7 at Edward Jones and is knocking on doors, and who has $300M AUM across 20 or so clients and turns people down regularly.

So I’m not positive that would be “appropriate” for the public forum. That said, I personally am not that shy and if anyone wants to PM and discuss I’d likely be willing to share more.

I’m assuming others “may” be as well. Never hurts to reach out to someone who is “saying” things you agree with or want to understand more and have that conversation. Just don’t be upset if that’s a redline for some.

I am willing to share I just turned 42 and have had a modest government job for 20 years.