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

[Stache Attack]

Very cool thread and I ponder this often personally. Wife and I live in an affordable house did a pretty good down payment on it after selling our last two houses. We have been paying minimum on the 6.37% interest mortgage. Using that money to put into 401k and Roth IRA(she was behind a bit…). Now I’m to the point I’m going to do a one time buy down and do bi-weekly payments with a bit extra. I want to be liquid if we do see this projected downturn so we could sell and build new, and/or pick up a cheaper vehicle compared to current markets. We both have stable jobs currently. She is looking for a new one, I told her to hold strong for now until we see what happens. I have turned down a couple offers as I do not want to be the most recent hire or in a new market.

This thread is very specific to each person, their age, income, home, mortgage, etc. Great thread though

 

[WaWox]

Wouldn't it make sense if you pay the $100k mortgage and sort out other bills as it goes. Emergency funds $20k to live on after taking care of the mortgage makes a lot of sense.

I dont think so, even with the extra 20k.

Think about your monthly expenses and a real bad downturn where you are out for 6-9months.

Let's say mortgage is 3k/mo and if you paid it off it drops to 500/mo (taxes + insurance). Lets say you are unemployed and COBRA is 1.5k/month. 2.5k/mo to live on otherwise (car + food + stuff). That's 4.5k/month without and 7k/month with mortgage.

Would you rather have 120k or 20k to last you 6 months? The 20k is literally not enough! But 120k lasts comfortably even with the higher monthly total

 

[greaser23]

This topic is always discussed as if you have to do one or the other.

Very cool thread and I ponder this often personally. Wife and I live in an affordable house did a pretty good down payment on it after selling our last two houses. We have been paying minimum on the 6.37% interest mortgage. Using that money to put into 401k and Roth IRA(she was behind a bit…). Now I’m to the point I’m going to do a one time buy down and do bi-weekly payments with a bit extra. I want to be liquid if we do see this projected downturn so we could sell and build new, and/or pick up a cheaper vehicle compared to current markets. We both have stable jobs currently. She is looking for a new one, I told her to hold strong for now until we see what happens. I have turned down a couple offers as I do not want to be the most recent hire or in a new market.

This thread is very specific to each person, their age, income, home, mortgage, etc. Great thread though

At 6.37%, I'd be paying that mortgage down. Sub 4% it's hard to argue paying that down instead of investing. Although this question always seems to be asked as if you have to do one thing or the other. Can very easily make additional payments towards the mortgage while still also investing, regardless of interest rate.

 

[NRA4LIFE]

I dont think so, even with the extra 20k.

Think about your monthly expenses and a real bad downturn where you are out for 6-9months.

Let's say mortgage is 3k/mo and if you paid it off it drops to 500/mo (taxes + insurance). Lets say you are unemployed and COBRA is 1.5k/month. 2.5k/mo to live on otherwise (car + food + stuff). That's 4.5k/month without and 7k/month with mortgage.

Would you rather have 120k or 20k to last you 6 months? The 20k is literally not enough! But 120k lasts comfortably even with the higher monthly total

Where can you live where your taxes/ins is 500 a month? Ours is well over twice that much.

 

[svivian]

Where can you live where your taxes/ins is 500 a month? Ours is well over twice that much.

I live in CO and mine is $308/mo

 

[NRA4LIFE]

I live in CO and mine is $308/mo

Dang, my insurance alone is more than that.

 

[neandth]

Dang, my insurance alone is more than that.

Well Washington is way more expensive.

 

[Tahoe1305]

I live in CO and mine is $308/mo

hahaha. I was thinking the same thing everything about CO is expensive. But I’m here too right at $500 for insurance and taxes too and by far the most expensive house I’ve ever owned (living in 6 different states). I guess it’s all relative.

 

[svivian]

hahaha. I was thinking the same thing everything about CO is expensive. But I’m here too right at $500 for insurance and taxes too and by far the most expensive house I’ve ever owned (living in 6 different states). I guess it’s all relative.

Exactly, however if we are talking Texas then I would understand home taxes being through the roof.

 

[WaWox]

Eastern Washington you can quite easily get a home with those numbers! Western Washington too if you are not looking inside Seattle and are fine with a smaller place. My numbers are a little (~30%) higher but this was just for the example calc. To be honest, the unrealistic component here were
- 100k mortgage balance
- 2.5k mortgage monthly
Hard to find a place where 2.5 will ever be the monthly!!!

 

[Tahoe1305]

Eastern Washington you can quite easily get a home with those numbers! Western Washington too if you are not looking inside Seattle and are fine with a smaller place. My numbers are a little (~30%) higher but this was just for the example calc. To be honest, the unrealistic component here were
- 100k mortgage balance
- 2.5k mortgage monthly
Hard to find a place where 2.5 will ever be the monthly!!!

I hope you’re saying hard to find a place where you live.

Thats a $425k mortgage most places (including down payment). There are a TON of places in the US where you can get a nice 4/2/2 house or bigger for that.

Hell I can find that in CO which is one of the more expensive places I’ve lived.

 

[fngTony]

I hope you’re saying hard to find a place where you live.

Thats a $425k mortgage most places (including down payment). There are a TON of places in the US where you can get a nice 4/2/2 house or bigger for that.

Hell I can find that in CO which is one of the more expensive places I’ve lived.

Are you saying $425k before or after a down payment?

 

[Tahoe1305]

Are you saying $425k before or after a down payment?

Before 20% down payment. inclusive of insurance and taxes.

 

[fngTony]

Before 20% down payment. inclusive of insurance and taxes.

I’m not seeing anything close to that in Colorado that isn’t a major fixer upper. Where are you seeing those around here?
Edit, Grand Junction area looks to be the only place that also has a decent size economy to make a living.

 

[Tahoe1305]

Getting a reasonable home in a nice area easy.

The problem here (Colorado Springs) is 1) the basements make the SF much bigger than most need. 2) we get conditioned to them and 3000sf becomes the new norm.

I was under contract in northern c springs for $450k homes before we found the one we ended up in. We have a family and it wasn’t hard nor suffering. And northern c springs is 30% more than southern c springs.

2935 Rhapsody Dr, Colorado Springs, CO 80920 | MLS #4464922 | Zillow

This 2138 square feet Single Family home has 4 bedrooms and 3 bathrooms. It is located at 2935 Rhapsody Dr, Colorado Springs, CO.

www.zillow.com

Edit: I’ve owned 7 houses (in 4 states) now. Only the current one has been more than $2500. And that was intentional due to it being a retirement home.

 

[fngTony]

Getting a reasonable home in a nice area easy.

The problem here (Colorado Springs) is 1) the basements make the SF much bigger than most need. 2) we get conditioned to them and 3000sf becomes the new norm.

I was under contract in northern c springs for $450k homes before we found the one we ended up in. We have a family and it wasn’t hard nor suffering. And northern c springs is 30% more than southern c springs.

2935 Rhapsody Dr, Colorado Springs, CO 80920 | MLS #4464922 | Zillow

This 2138 square feet Single Family home has 4 bedrooms and 3 bathrooms. It is located at 2935 Rhapsody Dr, Colorado Springs, CO.

www.zillow.com

Edit: I’ve owned 7 houses (in 4 states) now. Only the current one has been more than $2500. And that was intentional due to it being a retirement home.

That’s a nice house for sure. I was looking at this from the perspective of median income and median home prices of a given area. If I could have my Denver income in Colorado Springs, it would be great but that home is probably 6 to 650 depending on what part of Denver it’s in.

 

[IDVortex]

If it wasn't for the CO governor, id be tempted to convince my wife to move to CO....

 

[fngTony]

If it wasn't for the CO governor, id be tempted to convince my wife to move to CO....

His tenure is up, you should run for that office!

 

[IDVortex]

His tenure is up, you should run for that office!

I get in trouble/timed out here for my comments, last thing I need is to be in office and not be able to make comments.

 

[2-Stix]

I paid off the house at 40. Then we bought another and paid it off at 43. Now I work part time15-25 hours a week, not much going into savings or into retirement if any, but my business has always been up and down (I run a design build firm) and I have zero risk now and I am home with the kids all the time. They are 7 and 12. The wife and I will ramp back up at some time to fund retirement and that will be paying off the 3rd home that we just break even on. I dont like the market.