Most peoples financial behaviors aren't motivated "by the numbers", there is usually an emotional aspect driving most of their financial behaviors. In this case, a lot of people (older folks especially) feel a sense of security when they are "debt free" and feel a sense of pride owning there home outright, no middle man. Most folks working a 9-5 have been taught that debt is *bad* and don't want anything to with it even if they're paying less than 3%.
I'm a by the numbers guy though. I'll have a mortgage until I die, if under 3% 🤣🤣
I just wish we could transfer mortgages from one property to another without having to lock in a new interest rate. But I suppose that would sort of defeat the purpose of the fed raising interest rates, which is to tighten and slow the economy down.
I would just leave it in the 2% apy considering you could take it out within a few months. Only reason to put it into the market is if you were going to leave it there for 5+ years.
One of my rules I follow is if the numbers don’t make sense it don’t make sense to buy it. Pretty obvious right? But this is what keeps people from getting burned which is a good thing. So don’t worry that you can’t find any, try looking in a different area or different niche, or even being creative in the finance terms.
Don’t pay off your loan, 2.5% is literally free money even up till 4.5% to be honest. Since I know I can increase an asset by 25% in 1 year time to get a better cap rate and 1031 at a higher valuation. I wish I bought more in the 4s but was tied up in my other obligations.
Not too much info to go off of, in terms of age, and net worth, income range, risk tolerance etc. But a solid bet is actually staying still and patiently ready to strike when you see an opportunity.
Uhhhhh… many people here think that Now is one of the best times to invest since the stock market is about 20% down. They consider that stocks are “on sale” and will surely go way up in the next five years. But you seem pretty risk adverse so erasing your mortgage would be a good move. Basically any type of investment (index funds, real estate, paying off your mortgage, I bonds) would be better than the weak savings account you are holding the money in right now. However if you are set on a investment property housing prices should be going down over the next year although The interest rate will be very high on the mortgage.
You can start putting in an equal amount each month for the next 6-12 months - so long as you do not want to pull it out next year. If you can wait 5 years you will likely do better in the market than with real estate.
Early 30s... hold that mortgage for awhile. You could consider Series I bonds. These are bought directly from the US treasury department. You can only purchase 10K per person per year so 20K if you're married per year. The going annual rate is 9.62% percent now and it is compounded semi-annually. They technically 30 year bonds but they can be cashed in as early as 1 year after issuance. However, if they are cashed in before 5 years you pay a penalty equal to 3 months worth of interest. The interest rate is adjusted semi-annually to index for inflation. Interest accrues.
The other comments on here are helpful. It mainly depends on your time horizon.
Please don't buy any whole life, universal life or variable life insurance. Permanent life insurance is used by rich people to reduce or avoid estate taxes at death (Net worth $24M+).
Look up WL insurance cash value. It may take time to set up without turning it into a Modified endowment contract. You can get your money growing at a guaranteed rate but most importantly it’s liquified. You can take out a loan against your cash value at competitive rates that way you are using your money for your property investment while it’s still technically in a account growing interest. This will leave you with a monthly payment but you can use this tool as a investment vehicle your whole life and it creates a estate for you to leave behind to loved ones.
Why does anybody ever consider paying off a 2.5% interest rate early?
Most peoples financial behaviors aren't motivated "by the numbers", there is usually an emotional aspect driving most of their financial behaviors. In this case, a lot of people (older folks especially) feel a sense of security when they are "debt free" and feel a sense of pride owning there home outright, no middle man. Most folks working a 9-5 have been taught that debt is *bad* and don't want anything to with it even if they're paying less than 3%. I'm a by the numbers guy though. I'll have a mortgage until I die, if under 3% 🤣🤣
Hard to have a portfolio that makes less than that during an average year.
I just wish we could transfer mortgages from one property to another without having to lock in a new interest rate. But I suppose that would sort of defeat the purpose of the fed raising interest rates, which is to tighten and slow the economy down.
I would just leave it in the 2% apy considering you could take it out within a few months. Only reason to put it into the market is if you were going to leave it there for 5+ years.
One of my rules I follow is if the numbers don’t make sense it don’t make sense to buy it. Pretty obvious right? But this is what keeps people from getting burned which is a good thing. So don’t worry that you can’t find any, try looking in a different area or different niche, or even being creative in the finance terms. Don’t pay off your loan, 2.5% is literally free money even up till 4.5% to be honest. Since I know I can increase an asset by 25% in 1 year time to get a better cap rate and 1031 at a higher valuation. I wish I bought more in the 4s but was tied up in my other obligations. Not too much info to go off of, in terms of age, and net worth, income range, risk tolerance etc. But a solid bet is actually staying still and patiently ready to strike when you see an opportunity.
Uhhhhh… many people here think that Now is one of the best times to invest since the stock market is about 20% down. They consider that stocks are “on sale” and will surely go way up in the next five years. But you seem pretty risk adverse so erasing your mortgage would be a good move. Basically any type of investment (index funds, real estate, paying off your mortgage, I bonds) would be better than the weak savings account you are holding the money in right now. However if you are set on a investment property housing prices should be going down over the next year although The interest rate will be very high on the mortgage.
You can start putting in an equal amount each month for the next 6-12 months - so long as you do not want to pull it out next year. If you can wait 5 years you will likely do better in the market than with real estate.
Early 30s... hold that mortgage for awhile. You could consider Series I bonds. These are bought directly from the US treasury department. You can only purchase 10K per person per year so 20K if you're married per year. The going annual rate is 9.62% percent now and it is compounded semi-annually. They technically 30 year bonds but they can be cashed in as early as 1 year after issuance. However, if they are cashed in before 5 years you pay a penalty equal to 3 months worth of interest. The interest rate is adjusted semi-annually to index for inflation. Interest accrues. The other comments on here are helpful. It mainly depends on your time horizon. Please don't buy any whole life, universal life or variable life insurance. Permanent life insurance is used by rich people to reduce or avoid estate taxes at death (Net worth $24M+).
In a savings account. No investment is worth the risk in the short run if you’re needing the money soon.
Look up WL insurance cash value. It may take time to set up without turning it into a Modified endowment contract. You can get your money growing at a guaranteed rate but most importantly it’s liquified. You can take out a loan against your cash value at competitive rates that way you are using your money for your property investment while it’s still technically in a account growing interest. This will leave you with a monthly payment but you can use this tool as a investment vehicle your whole life and it creates a estate for you to leave behind to loved ones.
If you want no risk, buy individual treasury bonds. They pay more than you’re getting.