Would you rather pay off your mortgage or invest? For me, my rate is so low on my mortgage. Mortgages go to $0. Investing has upside. Unlimited upside. In market downcycles, I might think about prepaying my mortgage. There are definitely some huge advantages to living mortgage free. You likely don't need to keep a job haha. What is everyone else's take?
Ditch the mortgage, you will be surprised how much money you have left when you have no debt draining the account monthly
I had the chance to pay mine off and I didn't. I lost that money when the market went south at the end of 2018. If I had held onto the 1200 shares of ROKU I sold at $40 I would be speaking differently.
Time allows you to take risks. Typically, when it comes to investing ventures that are more volatile. One of the best ways in investments like stocks and bonds. The best option is to invest in a factoring company that provides a good position in the market.
It's been a long time but I remember switching from saving to paying my mortgage. It was a black hole for money kept me penniless for a few years and then I turned into a financial 800# gorilla. All of the big things I started doing, back in the day, were enabled by having a big asset to use as leverage and a whole lot of cash flow. That's how I got into commercial property. Of course, my days of taking risks are over, I hope, so my outlook is different. These days, I look at it as +/-. If my mortgage is $1000 and I can either pay off the mortgage or buy a REIT which would pay me $1250 for the same amount of money, I would plow money into the REIT. I also set up a DRIP. If I were to ever lose my job, I'd turn off the DRIP.
Depends on the housing market in your area, would be rent cost vs mortgage cost and the amount you would lose to interest during the period of the mortgage.
Pay off your home loan faster and get out of debt. The faster you pay off your mortgage the less you will pay in interest
We opted to pay everything off first. We now owe nothing, not a cent to anyone. It's hard to imagine ever looking back and saying gee, if only we still had a mortgage payment.
I agree with everyone. But,.... My mortgage can be paid off tomorrow if desired. But my opinion (for my situation), is I rather keep my money working for me, and a paid off house value is slow moving lazy work, not always showing great returns over longer terms. My wife and I have had these exact discussion. But I show her my returns on hard working money is producing more real returns than a paid for house would. And the monthly payment unchanging at a very low interest rate paying on decade old debt, well, the numbers in our case made it obvious to our situation. Houses are not great investments except over longer terms, and only when you finally sell it. Let alone the ongoing costs of maintaining will constantly erode your perceived returns. I consider a mortgage a living expense.
I realize my reply seemed rather,... erm,... self-centric? If so I do apologize. To explain. If you, lets say, $100,000 left on your mortgage, that you purchased lets say, 10 years ago. You are making your present mortgage payment with money that you have in the immediate, and paying down a debt that was purchased with money that wasn't as devalued ten years ago. New money is cheaper than old money and is worth less. Yet, your monthly mortgage remains unchanged. So you a giving the bank money monthly that doesn't have near the purchasing power that it did when the bank let you borrow it. This is a win for the long term. You get to pay the bank with money that is worth less. Now, if your mortgage has a rate, for example, of maybe 4%, that is where the bank makes up their loss (and a bit of profit) of waiting for you to pay them back with the cheaper money. In example, you have the $100,000 invested and you are making an average of 10% returns per year, congrats. But not unrealistic. So to earn 10% on your investments, and you are paying the bank 4% for your mortgage, you are 6% ahead of the game with the new/old money scenario. In this hypothetical, it only makes sense to keep the mortgage and weanie out the new worth less money (not worthless), to the bank, while your investments provide you with a return greater than the cost of the home mortgage. But as said above, every single person has different needs and objectives. And that is an individuals choice to base their action on. Edit to add, yes, me and mine have always made advance payments to bring down the principal on our mortgage. Fair disclosure.
This one/topic is interesting to me. I think it absolutely has to deal with your particular situation. And i would like to think how you decide, is really a reflection of your investment appetite/tolerance, knowledge... insert debate. Here.....but as tomb16 mentioned, it was his segway to commercial properties. i was interested in real estate before stocks. I initially wanted to use the market to fund my real estate ventures, and still will if i feel markets determine i can. And if i have the eye for it. I have about 20% equity in a single property that is positive income of rough math, 35% rent over mortgage, monthly. I considered actually refi’ing in late feb, early march, to capitalize on the crash. In the end, i was scared of all the uncertainties. in hindsight, it would have been the better outcome, so far, percentage wise, but i am happy knowing I can still make the payments if the tenant fails. I know u asked about payoff and not refi, but using money is using money. And i am assuming personal dwelling, instead of rental. But i think housing market, stock market (since u are on a stock forum), mortgage debt to income ratio will all play a factor.
Great posts in here. I don't pretend to have better insight than anyone else but I feel investing with borrowed money is a sharp knife that will hurt a whole lot more people than it will help. In late 2019, we went to a Christmas party with some people my wife is friends with. I don't like talking about investing at these things but two of the other husbands were talking about investing and how much money they were making. These guys were getting rich quickly. Unreal. Of course, I said nothing. The truth turned out to be that both of these guys had lost quite a bit of money in the markets, even before the COVID crash. Now one is facing BK and the other couple isn't in danger of losing their home but she is going to have to work for several more years when she had been on the cusp of retirement. I hate to be so dark and distrusting but extreme few of the online success stories seem likely to be true, to me. If these people were so amazing at investing, they wouldn't need jobs. It's like a poker game where everyone leaves the table having won a ton of money. We can't all win. Because of this, it makes me cringe to think about the idea of people borrowing money to invest. It's a volatile thing to do. Having said that, we have done it. We had a commercial building with an LOC attached. In 2009, when everyone hated real estate, I bought the hell out of a REIT that was paying 11% and the books made the distribution look extremely sustainable. I threw everything we had at it, including the entire LOC. The monthly distribution paid the debt service plus another salary. It was literally like another income. That's one of the better moves we've made. If the company had failed and we lost it all, we could have carried the debt service but I would have been pretty grumpy for a decade. That company was bought out in mid 2019 for 2.4x what I paid in in 2009, plus it heavily distributed for a decade. But alas, they aren't all success stories. I'm trying to stress we don't make a habit of borrowing to invest, we've only done it once, and we used the money for an investment that was excruciatingly conservative. Another factor that I feel is under-appreciated is how paying off a mortgage makes you feel. When I paid off my mortgage in 2001, I felt like bullets would bounce off my chest. It's the single most empowering thing I've done in my life. That event caused me to be a lot more aggressive in life, including investing, and that has served me very well. At the very least, I wouldn't prioritize paying the mortgage above a 401K contribution for anyone who is a professional making a decent salary. The tax savings of a 401K contribution far out weigh mortgage interest. I'd make sure my Roth is healthy, too. There's nothing wrong with putting the tax refund down on the mortgage, though.
@TomB16 You sir are a lucid educated thinker, and nothing you said suggests otherwise. I commend you for that very much. You never leverage your investments with any kind of debt for sure. In my case my mortgage existed regardless of any investment appetite. And I have heard of and never once considered borrowing for the sake of investing. I don't even play the options market even if I know how they function. My risk tolerance limits would be blown out of the markets, and I don't have the stomach for it. I never will.
The more I read your posts, the more I believe you to be my long lost brother. People like me scorn the idea of taking risks and gambling. It probably comes off as though I have never done it; I have. The thing is, we all have. [ edited for brevity ] If you stick your neck out enough times, it will get cut off sooner or later but taking the ultra-conservative path 100% of the time isn't a guaranteed win, either. The *very* occasional risk is in the history of every successful person. You just can't gain a lot of wealth without a couple of pieces of good fortune and on the very odd occasion, good quality, smart, people get knocked out of the game when they aren't doing anything particularly crazy. Mostly it's lunatics that lose it all but the very rare sharp business person does, as well.
Risk,... What a wild word that means something different to each individual. Someone ought to start a thread just about risk and risk tolerance. I would participate. We all have risk. When you drive to the store, a massive risk you partake in. Car wrecks, robbed out front, ripped off by a bad cashier, and now COVID. A house is a miserable investment in reality. Except when you finally sell. But you risk floods, fire, earthquakes, etc. But those can be insured. Then you now the lawn, fix up or repaint, maintain your taxes, and all other expenses. The one who doesn't take risk is the real estate broker who gets their 3% regardless of your issues, on both sides of the sale. Everything, not just in houses or investing, requires a certain amount of gamble and risk management/acceptance. And you will notice your risk tolerance changes through life all the time.
It all depends on your individual finances. Many options. You could, in theory, buy the house in cash. That would free up your cash flow from paying rent or mortgage. You could then draw against the equity in the home, depending on interest rates, then put that money to work for you. A friend of.mine, not me, leveraged his house, bought a rental, the tenant's rent pays his debt, and he writes off interest payments on a loan which tenants pay for. He's living in his own house, technically for free, gets a free house paid by tenants, writes off interest he doesn't pay, and has increased free cash flow after writing off interest and depreciating the real estate.
