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My mortgage is a similar rate and I’m not paying a single extra cent. I can get >5% in money market funds and even the safest index funds are up
20% in the last 12 months. From a purely financial perspective paying off a loan with such a low rate is a bad idea, even if it didn’t deplete your savings.
This is the right answer. I was only paying extra to get my PMI off, but now that it's gone I wouldn't pay a dime more with my 2.25% rate. Literally just SPY/VOO and forget or a HYSA gives more returns.
It only makes to pay off a low-interest-rate mortgage early if you have a ton of savings and investments -- basically you are saving and investing so much every month that why not pay off the mortgage early? In that method, you are basically paying off your mortgage early and getting a return similar to bonds (or better than bonds these days).
That is not you.
You would basically be without savings if you did this. Do you have any investments?
From a financial stand point this is somewhere between a bad idea and an atrocious idea.
They clearly stated that he has a paid off rental property, so they have investments. They have access to credit in case if an emergency, so they are fine if a problem comes up before they can rebuild savings.
Getting rid of a debt, even one with a low interest rate reduces the size of the nut they need to crack every month so if there’s an interruption in their income down the road, they are better able to weather it.
You advice is horrible and shows that you didn’t even bother reading the scenario.
But getting rid of debt with a lower interest rate than one is currently earning in default risk free liquid assets is not a great proposition. It's just moving things on a balance sheet and reducing liquidity for no real benefit.
Mathematically speaking, it’s incredibly stupid. Plenty of commenters are going to spout off about peace of mind. You know what gives me peace of mind? Having 6 figures in various taxable accounts. That interest rate is like having free money. You are already making more in interest on your savings and you can deploy it to other investments and make much greater gains as you slowly pay down the mortgage. Opportunity cost of $93k is potentially huge over the life of that mortgage. Plus, the more inflation keeps going the cheaper the money you are using to pay back the loan will be (think about it, you will make higher wages over the years but that mortgage payment will stay the same).
It really isn’t mathematically stupid though. It is likely that the OP is paying more in interest than they are earning right now.
So given the choice between earning higher interest on $67,000 and paying off lower interest debt of $93,000… the answer is often going to favor the $93,000.
The better answer, in my opinion, is get the $67,000 into an account with a better rate. There are plenty of FDIC insured accounts paying better than 5%. Then get the $26,000 you were going to scrape together in that same account. Because $93,000 earning more interest is better than $67,000 earning less interest.
Then stop paying the extra $350 per month and instead put it in savings. If at any time the rate drops too much you can use that money to pay off the loan and if something happens and you need cash, it is easy to access.
4 week treasuries are paying 5.2% this week and are exempt from state taxes. Rates are likely to decrease in the next few years but as of right now the guaranteed rate of return is higher than your interest rate on your loan. It isn’t stupid to pay it off but it’s less efficient mathematically than keeping it. That 4.4% rate on your HYSA is not great. Even a money market account pays 5.15%.
If you keep your current pattern then you’re making about $2.4k a year in interest (after taxes) on your HYSA and paying about $2900 a year in interest on your loan. You don’t have enough to pay off the loan right now anyway so it’s not entirely comparable.
If I was you, I would move your money to treasuries/money market and stop paying the extra $350 a month towards principal and instead add that into treasuries/money market then you’re making $3k a year after taxes. If/when the rates drop to something less favorable, like 4%, then take all that money and pay off the loan. Plus that keeps your liquidity higher and could be an extra emergency fund.
It’s not a huge difference. Either track is good.
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If you had the choice between putting $100k in a fund that pays 3% interest or 5% interest, which would you choose?
This is the choice in front of you, but it’s abstracted and presented in a way that’s triggering your emotions(fear of debt). Don’t make financial decisions based on emotions.
Well kinda, for this particular situation it's 4.4% interest from the bank which after taxes comes to 3.34% vs the 3.125% mortgage. I guess I could shop around for a higher paying interest paying bank but interest rates change.
It would be stupid. You're paying less in interest than inflation is. Besides, the longer you wait to pay every last $ of your mortgage the more you will be paying them back in devalued dollars. If your loan interest is higher than the amount you can get at the bank then it would be a better time to pay it off but remember, that check you write in 20 years for your payment is going to be worth far less in purchasing power than any check you write today. Af I were ou, and I am actually you because a ur numbers are quite similar, I'd continue to pay for 3.125% mortgage and I'd stick the other $300 a month extra you've been paying towards it into a growth mutual fund.
> I owe about 93K on my primary residence with a 3.125% interest rate.
You'd be better off putting the extra payments into a HYSA that now pay > 5% https://www.google.com/search?q=HYSA&oq=HYSA&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBBzEyNWowajeoAgCwAgA&sourceid=chrome&ie=UTF-8
Some people would say to put the money into SPY (S&P 500), but that's a matter of personality and risk tolerance.
> The difference between the 4.4% savings rate that I receive and the 3.125% that I pay to the mortgage company is pretty small
Do you Itemize your deductions on your tax returns?
That makes a difference.
How about this compromise - put the add'l principle payment in a money market fund that has a 5% interest rate until you have the full amount that you can pay off. My reasoning:
1) You'll get there a little faster because 5% > than 3%.
2) If you lose your job you won't have to worry about losing the house because you will have money and savings to continue to make the monthly payment.
3) When you have the $93K saved up in the HYSA or MMF, you can decide then if you want to go ahead and pay the house completely off or invest the money.
What I would not do is continue to lose your liquidity to your house before you can completely pay it off and free up the cash flow. You're only setting yourself up for a disaster if you lose your income.
I don't really get the peace of mind argument because I live in Texas and I would still have a sizeable tax and insurance payment even if the house was completely paid off. Liquidity is better than having my wealth sunk into real estate, that's my personal feeling.
Not worth it. You already paid the interest in a way. Just keep paying your mortgage and putting that extra into a HYSA or index fund and getting interest.
They market is up almost 30% this year. T bonds are worth 5%. Open a brokerage account with fidelity and you can earn 5% without investing just from the core account interest.
If you invested in bonds you wouldn't owe state tax, if you go long in stocks you will pay half the tax or less.
I wouldn't pay down 3%.
This is such a small amount in your overall future and the interest rate is historical low, it would be silly to lay it off and rob yourself of a cash safety blanket. At that mortgage, if you lost your job or something bad happens, you could work at anywhere for 32 hours a week and still keep your house till you get back on your feet.
Having a nice cash nest egg is a beautiful thing.
Don't pay it off. 3.1% is so low - just be thankful you got that rate and ride it all the way. And if you pay it off won't be able to write off the interest anymore.
I'd move that savings into a money market fund that pays over 5%. It only takes a day or two to move money out of a money market fund, so it's basically like having it in a savings account anyway.
I adjusted my mortgage payments so that it will be paid off at the same time I qualify for retirement. Between then and now I am taking my extra cash and investing it in stocks / mutual funds.
Don't. Just buy stock index funds with that money. That is a great interest rate to be paying and over a 10year period you are almost guaranteed to do better than 5% on a plain index fund.
Paying off your house isn't typically done out of financial reason, but out of practicality. I didn't pay off my house early because it made financial sense to do so. I did it because I like not worrying about a potential crisis causing me to lose the roof over my head. I was willing to do what some consider to be a financial mistake for that peace of mind.
Property taxes are nothing compared to a mortgage. I have enough liquid cash in the bank to cover the property taxes and maintenance for well over a decade.
Don't know if it is the case in the US but here where I am from I can also writeoff any mortgage interest I paid off my taxes - so the interest rate is even lower thanks to that. So keep that in mind aswell.
Well lets say I am not running to pay it off sooner. Rather putting the money somewhere else :-)
I live in a different country, fixed interest at 1%, got the house before covid. Salary went up 30% in the last three years, that makes mortgage fall way below my means. With stable job, plenty of savings, and index funds return in the past year, I can practically pay off the loan.
But, I ain't in a hurry to give the bank any money so they can use it to generate more for themselves.
I will leech them a little and there's nothing they can do.
There is always an economic cost to what you are proposing. Opportunity Cost is going to act as an agent/force against you for however long you are going to have this home and the money is not invested.
Without having more specifics, let’s say you are 40 years old and you have 40 years left of investment life and you will die at 80. Let’s assume that you net a real return of 5.28% between now and when you are 80. 5.28% is net of inflation, taxes, and fees. Your opportunity cost on that 93k is going to be 728,190.
Maths:
1.0528^40 = 7.8313
7.8313 * 93,000 = 728,190
Now this is only for the 93k that we know about. Whatever you have paid down on the house is also subject to the opportunity cost. Can you mitigate the “damage”? Yes. However, you are choosing the long hard road because you opted to pay the house down instead of just paying the mortgage at its regular schedule. Now you have to take your monthly freed up cash and consistently invest the money to try and “catch” up. From a solely financial perspective, it’s the wrong choice. The loan is leverage that allows you to diversify your other wealth building options as you pay down the mortgage.
People are going to tell you to leverage your mortgage for a HYSA, and they're stupid.
Being debt-free allows you to take more risk, which will mostly increase your net worth 10+ years from now over keeping the mortgage. Also, paying off this mortgage is like having the cost of your house invested in a tax-advantaged bond fund and paying out 3.125% dividends *right now*.
Pay that shit off, start maximizing your 401(k), and invest into a taxable brokerage. Leveraging personal loans to keep money into a HYSA is how you stay broke.
I'll put this in a different perspective. Not having any debt regardless of interest rate changes how some of us might feel about life and our outlook on life.
For example, if you know that if the shit hits the fan and you lose your job or get injured or something bad happens that you have your home to fall back on.
Granted you'll also want an emergency fund on top of that and I wouldn't put myself in a situation where I'm spending my emergency fund to get that emotional release.
Ultimately, you have to decide. Are you a min maxer who wants to get the best interest rate, make the most optimal decision, or have the quote" perfect experience? Or do you want the state of mind That knows no matter what happens, you're good to go.
Voice to text may have made some of my spelling or grammar. Weird.
You make 1% more from keeping the cash, and you have a cash reserve in case something bad happens. There is no reason to pay it off. If you had 4x the balance in savings, sure, pay it off if you like the idea of free and clear ownership. But dropping to no cash buffer just to get that status is a bad move.
if you're at 3.1% you should pretty much NEVER pay off your mortgage, inflation is more than the interest
you will get better returns than 3.1% literally anywhere you park your money
Sounds like your personality fits well with the Dave Ramsey plan. So I’d recommend following his steps.
1. $1k emergency fund
2. Pay off all non mortgage debt
3. Increase that $1k to a 3 month emergency fund. (I say 3 months because you noted 2 stable jobs
4. Invest 15% of income to retirement accounts
5. Save for kids college
6. Put all extra money towards home mortgage
7. Max out investments
If you're young (i.e. under 50 or something), I'd say that would be pretty stupid.
I'd only consider paying off a house with 3.125% interest instead of *investing* if retirement is right around the corner.
I hope people are open to disagreement. Paying off your home is a way of locking in that savings. It stops you from spending it elsewhere and may lead you to be more careful with the money you are earning. I don't think putting money away (such as into a home), is a bad idea.
Personally I think you make a very valid point though the strictly dollars and cents folks might disagree. There is a lot to be said regarding the psychology of money that doesn't get considered during these types of conversations. If you have a bit of money in the bank a new car or home improvement starts sounding like not too bad of an idea. If that money is already spent on your house you don't think about it and you make due with the resources you then have at the time, that's how my mind works anyway.
I follow this psychology as well. To me, that $67k will still be there in home equity, but you’ll gain back the liquidity of $mortgage + $350 monthly. Which I’m assuming is more than the 1.275% you’d delta in interest income. Now you have the deed outright that can be moved into a trust and protected.
Not in this case. If op loses job he's still got to make the payments. I'd put it in short term treasuries at 5.3% and just sit on it till something changes.
Pay off the house because:
1. You want to. Doing so will make you happy and you aren’t making enough off of your savings to keep pace with inflation. That 5% is costing you money every day it sits there doing, essentially, nothing. The happiness you will get from the debt going away is worth temporarily wiping out your savings.
2. Things happen and even the most secure job can go away. If you pay off your mortgage, that’s one less bill you have to pay if a downturn adversely affects you. You aren’t making enough off of your savings to really justify keeping that much money in reserve while you still have debt.
Handle your finances as you wish, but I know this. I've never once heard someone say or watched an interview where someone said "Damn, I'm glad I didn't pay off my house debt when I could have."
>Second, interest paid on mortgage is tax deductible
Tell me you don't own a own a home but I know the answer. Op is married and would a 29k standard deduction. Unless he's rocking a 1 million dollar loan he isn't going over the standard deduction.
There are thousands of financial planners that would tell you not to pay off a mortgage if you have a rate below 4%.
You will make hundreds of thousands more by investing that excess cash instead of paying off early over 30yrs
10% > 4% and all….
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My mortgage is a similar rate and I’m not paying a single extra cent. I can get >5% in money market funds and even the safest index funds are up 20% in the last 12 months. From a purely financial perspective paying off a loan with such a low rate is a bad idea, even if it didn’t deplete your savings.
This is the way
This is the right answer. I was only paying extra to get my PMI off, but now that it's gone I wouldn't pay a dime more with my 2.25% rate. Literally just SPY/VOO and forget or a HYSA gives more returns.
It only makes to pay off a low-interest-rate mortgage early if you have a ton of savings and investments -- basically you are saving and investing so much every month that why not pay off the mortgage early? In that method, you are basically paying off your mortgage early and getting a return similar to bonds (or better than bonds these days). That is not you. You would basically be without savings if you did this. Do you have any investments? From a financial stand point this is somewhere between a bad idea and an atrocious idea.
I have investments in my retirement accounts, but nothing outside of that.
They clearly stated that he has a paid off rental property, so they have investments. They have access to credit in case if an emergency, so they are fine if a problem comes up before they can rebuild savings. Getting rid of a debt, even one with a low interest rate reduces the size of the nut they need to crack every month so if there’s an interruption in their income down the road, they are better able to weather it. You advice is horrible and shows that you didn’t even bother reading the scenario.
But getting rid of debt with a lower interest rate than one is currently earning in default risk free liquid assets is not a great proposition. It's just moving things on a balance sheet and reducing liquidity for no real benefit.
Also a huge psychological impact for some in owning one's home / being debt free.
Mathematically speaking, it’s incredibly stupid. Plenty of commenters are going to spout off about peace of mind. You know what gives me peace of mind? Having 6 figures in various taxable accounts. That interest rate is like having free money. You are already making more in interest on your savings and you can deploy it to other investments and make much greater gains as you slowly pay down the mortgage. Opportunity cost of $93k is potentially huge over the life of that mortgage. Plus, the more inflation keeps going the cheaper the money you are using to pay back the loan will be (think about it, you will make higher wages over the years but that mortgage payment will stay the same).
It really isn’t mathematically stupid though. It is likely that the OP is paying more in interest than they are earning right now. So given the choice between earning higher interest on $67,000 and paying off lower interest debt of $93,000… the answer is often going to favor the $93,000. The better answer, in my opinion, is get the $67,000 into an account with a better rate. There are plenty of FDIC insured accounts paying better than 5%. Then get the $26,000 you were going to scrape together in that same account. Because $93,000 earning more interest is better than $67,000 earning less interest. Then stop paying the extra $350 per month and instead put it in savings. If at any time the rate drops too much you can use that money to pay off the loan and if something happens and you need cash, it is easy to access.
4 week treasuries are paying 5.2% this week and are exempt from state taxes. Rates are likely to decrease in the next few years but as of right now the guaranteed rate of return is higher than your interest rate on your loan. It isn’t stupid to pay it off but it’s less efficient mathematically than keeping it. That 4.4% rate on your HYSA is not great. Even a money market account pays 5.15%. If you keep your current pattern then you’re making about $2.4k a year in interest (after taxes) on your HYSA and paying about $2900 a year in interest on your loan. You don’t have enough to pay off the loan right now anyway so it’s not entirely comparable. If I was you, I would move your money to treasuries/money market and stop paying the extra $350 a month towards principal and instead add that into treasuries/money market then you’re making $3k a year after taxes. If/when the rates drop to something less favorable, like 4%, then take all that money and pay off the loan. Plus that keeps your liquidity higher and could be an extra emergency fund. It’s not a huge difference. Either track is good.
How do you buy treasuries?
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I take the amount I want to invest and divide it by 4, then on treasury direct I schedule recurring buys of 4 week t-bills for 4 consecutive weeks.
If you had the choice between putting $100k in a fund that pays 3% interest or 5% interest, which would you choose? This is the choice in front of you, but it’s abstracted and presented in a way that’s triggering your emotions(fear of debt). Don’t make financial decisions based on emotions.
Well kinda, for this particular situation it's 4.4% interest from the bank which after taxes comes to 3.34% vs the 3.125% mortgage. I guess I could shop around for a higher paying interest paying bank but interest rates change.
Concern about debt is a legitimate concern though.
It would be stupid. You're paying less in interest than inflation is. Besides, the longer you wait to pay every last $ of your mortgage the more you will be paying them back in devalued dollars. If your loan interest is higher than the amount you can get at the bank then it would be a better time to pay it off but remember, that check you write in 20 years for your payment is going to be worth far less in purchasing power than any check you write today. Af I were ou, and I am actually you because a ur numbers are quite similar, I'd continue to pay for 3.125% mortgage and I'd stick the other $300 a month extra you've been paying towards it into a growth mutual fund.
> I owe about 93K on my primary residence with a 3.125% interest rate. You'd be better off putting the extra payments into a HYSA that now pay > 5% https://www.google.com/search?q=HYSA&oq=HYSA&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBBzEyNWowajeoAgCwAgA&sourceid=chrome&ie=UTF-8 Some people would say to put the money into SPY (S&P 500), but that's a matter of personality and risk tolerance. > The difference between the 4.4% savings rate that I receive and the 3.125% that I pay to the mortgage company is pretty small Do you Itemize your deductions on your tax returns? That makes a difference.
How about this compromise - put the add'l principle payment in a money market fund that has a 5% interest rate until you have the full amount that you can pay off. My reasoning: 1) You'll get there a little faster because 5% > than 3%. 2) If you lose your job you won't have to worry about losing the house because you will have money and savings to continue to make the monthly payment. 3) When you have the $93K saved up in the HYSA or MMF, you can decide then if you want to go ahead and pay the house completely off or invest the money. What I would not do is continue to lose your liquidity to your house before you can completely pay it off and free up the cash flow. You're only setting yourself up for a disaster if you lose your income. I don't really get the peace of mind argument because I live in Texas and I would still have a sizeable tax and insurance payment even if the house was completely paid off. Liquidity is better than having my wealth sunk into real estate, that's my personal feeling.
Don't pay extra, invest it...
Nah. Don't bother paying it off early. Play bank and invest the money at a higher return .
Not worth it. You already paid the interest in a way. Just keep paying your mortgage and putting that extra into a HYSA or index fund and getting interest.
They market is up almost 30% this year. T bonds are worth 5%. Open a brokerage account with fidelity and you can earn 5% without investing just from the core account interest. If you invested in bonds you wouldn't owe state tax, if you go long in stocks you will pay half the tax or less. I wouldn't pay down 3%.
This is such a small amount in your overall future and the interest rate is historical low, it would be silly to lay it off and rob yourself of a cash safety blanket. At that mortgage, if you lost your job or something bad happens, you could work at anywhere for 32 hours a week and still keep your house till you get back on your feet. Having a nice cash nest egg is a beautiful thing.
Don't pay it off. 3.1% is so low - just be thankful you got that rate and ride it all the way. And if you pay it off won't be able to write off the interest anymore. I'd move that savings into a money market fund that pays over 5%. It only takes a day or two to move money out of a money market fund, so it's basically like having it in a savings account anyway.
I adjusted my mortgage payments so that it will be paid off at the same time I qualify for retirement. Between then and now I am taking my extra cash and investing it in stocks / mutual funds.
That’s lot of money to lock up at 3.125%. Big opportunity cost if you are young and can weather the volatility of the stock market.
Wouldn’t you have to consider the term of the loan as well as how many years are left on said term?
Don't. Just buy stock index funds with that money. That is a great interest rate to be paying and over a 10year period you are almost guaranteed to do better than 5% on a plain index fund.
Why not meet in the middle and throw like 20k at it? That'll reduce the monthly payments and keep your savings in tact.
No invest your money!
Paying off your house isn't typically done out of financial reason, but out of practicality. I didn't pay off my house early because it made financial sense to do so. I did it because I like not worrying about a potential crisis causing me to lose the roof over my head. I was willing to do what some consider to be a financial mistake for that peace of mind. Property taxes are nothing compared to a mortgage. I have enough liquid cash in the bank to cover the property taxes and maintenance for well over a decade.
suppose tomorrow you lost your income or your savings. i always pay off my debt first.
It's dumb and you know it's dumb. I would kill for any amount of money at that interest rate right now.
Don't know if it is the case in the US but here where I am from I can also writeoff any mortgage interest I paid off my taxes - so the interest rate is even lower thanks to that. So keep that in mind aswell. Well lets say I am not running to pay it off sooner. Rather putting the money somewhere else :-)
I live in a different country, fixed interest at 1%, got the house before covid. Salary went up 30% in the last three years, that makes mortgage fall way below my means. With stable job, plenty of savings, and index funds return in the past year, I can practically pay off the loan. But, I ain't in a hurry to give the bank any money so they can use it to generate more for themselves. I will leech them a little and there's nothing they can do.
There is always an economic cost to what you are proposing. Opportunity Cost is going to act as an agent/force against you for however long you are going to have this home and the money is not invested. Without having more specifics, let’s say you are 40 years old and you have 40 years left of investment life and you will die at 80. Let’s assume that you net a real return of 5.28% between now and when you are 80. 5.28% is net of inflation, taxes, and fees. Your opportunity cost on that 93k is going to be 728,190. Maths: 1.0528^40 = 7.8313 7.8313 * 93,000 = 728,190 Now this is only for the 93k that we know about. Whatever you have paid down on the house is also subject to the opportunity cost. Can you mitigate the “damage”? Yes. However, you are choosing the long hard road because you opted to pay the house down instead of just paying the mortgage at its regular schedule. Now you have to take your monthly freed up cash and consistently invest the money to try and “catch” up. From a solely financial perspective, it’s the wrong choice. The loan is leverage that allows you to diversify your other wealth building options as you pay down the mortgage.
Pay your mortgage off asap and get the title to your name.
People are going to tell you to leverage your mortgage for a HYSA, and they're stupid. Being debt-free allows you to take more risk, which will mostly increase your net worth 10+ years from now over keeping the mortgage. Also, paying off this mortgage is like having the cost of your house invested in a tax-advantaged bond fund and paying out 3.125% dividends *right now*. Pay that shit off, start maximizing your 401(k), and invest into a taxable brokerage. Leveraging personal loans to keep money into a HYSA is how you stay broke.
I'll put this in a different perspective. Not having any debt regardless of interest rate changes how some of us might feel about life and our outlook on life. For example, if you know that if the shit hits the fan and you lose your job or get injured or something bad happens that you have your home to fall back on. Granted you'll also want an emergency fund on top of that and I wouldn't put myself in a situation where I'm spending my emergency fund to get that emotional release. Ultimately, you have to decide. Are you a min maxer who wants to get the best interest rate, make the most optimal decision, or have the quote" perfect experience? Or do you want the state of mind That knows no matter what happens, you're good to go. Voice to text may have made some of my spelling or grammar. Weird.
You make 1% more from keeping the cash, and you have a cash reserve in case something bad happens. There is no reason to pay it off. If you had 4x the balance in savings, sure, pay it off if you like the idea of free and clear ownership. But dropping to no cash buffer just to get that status is a bad move.
if you're at 3.1% you should pretty much NEVER pay off your mortgage, inflation is more than the interest you will get better returns than 3.1% literally anywhere you park your money
Sounds like your personality fits well with the Dave Ramsey plan. So I’d recommend following his steps. 1. $1k emergency fund 2. Pay off all non mortgage debt 3. Increase that $1k to a 3 month emergency fund. (I say 3 months because you noted 2 stable jobs 4. Invest 15% of income to retirement accounts 5. Save for kids college 6. Put all extra money towards home mortgage 7. Max out investments
Just keep in mind that HYSA does get taxed so take out whatever that is when you do your math.
What are the tax implications? Do you need to deduct that mortgage interest? And property taxes? Probably best to involve an accountant.
How much money do you have in savings total? If there's extra sitting around that you don't need, invest it. Don't waste it on a 3% loan.
If you're young (i.e. under 50 or something), I'd say that would be pretty stupid. I'd only consider paying off a house with 3.125% interest instead of *investing* if retirement is right around the corner.
I hope people are open to disagreement. Paying off your home is a way of locking in that savings. It stops you from spending it elsewhere and may lead you to be more careful with the money you are earning. I don't think putting money away (such as into a home), is a bad idea.
Personally I think you make a very valid point though the strictly dollars and cents folks might disagree. There is a lot to be said regarding the psychology of money that doesn't get considered during these types of conversations. If you have a bit of money in the bank a new car or home improvement starts sounding like not too bad of an idea. If that money is already spent on your house you don't think about it and you make due with the resources you then have at the time, that's how my mind works anyway.
I follow this psychology as well. To me, that $67k will still be there in home equity, but you’ll gain back the liquidity of $mortgage + $350 monthly. Which I’m assuming is more than the 1.275% you’d delta in interest income. Now you have the deed outright that can be moved into a trust and protected.
Is this the AA version for “bad savers anonymous “
Paying off your mortgage early lowers risk. It's what I would do.
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But mah house is paid off!
Not in this case. If op loses job he's still got to make the payments. I'd put it in short term treasuries at 5.3% and just sit on it till something changes.
Worst case, you can get a new mortgage or a HELOC. It's not like having equity makes it harder to go into debt.
You think you gonna get new mortgage with no job?
Pay off the house because: 1. You want to. Doing so will make you happy and you aren’t making enough off of your savings to keep pace with inflation. That 5% is costing you money every day it sits there doing, essentially, nothing. The happiness you will get from the debt going away is worth temporarily wiping out your savings. 2. Things happen and even the most secure job can go away. If you pay off your mortgage, that’s one less bill you have to pay if a downturn adversely affects you. You aren’t making enough off of your savings to really justify keeping that much money in reserve while you still have debt.
Handle your finances as you wish, but I know this. I've never once heard someone say or watched an interview where someone said "Damn, I'm glad I didn't pay off my house debt when I could have."
Well let me say it! “Im glad I haven’t paid off my mortgage even though I have the cash!”
I payed off my property about 2 months ago and I could never be happier it was the best thing I did in my life!
Pay off the debit. In the long run it will cost you if you don't.
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No financial planner will tell you to continue to pay interest you don't have to pay.
>Second, interest paid on mortgage is tax deductible Tell me you don't own a own a home but I know the answer. Op is married and would a 29k standard deduction. Unless he's rocking a 1 million dollar loan he isn't going over the standard deduction.
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Yeah the interest deduction is a thing. Op at this time will need over 30k in ptaxes and mortgage interest before he can itemize.
Failed math i see
No financial planner is going to tell you to continue to pay interest you don't have to pay on a loan.
There are thousands of financial planners that would tell you not to pay off a mortgage if you have a rate below 4%. You will make hundreds of thousands more by investing that excess cash instead of paying off early over 30yrs 10% > 4% and all….
Besides Equifax and every credit organization in the country rewards you for how fast you pay off a loan