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Payoff the Mortgage or Invest?

Vincent Vega

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The Hen that laid the Golden Legos
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I have a 30 year mortgage on a house we bought last year. The interest rate is 4.5% and we will not be itemizing on our tax returns going forward assuming the standard deduction stays at $24K. I will be 74 before it's paid off so my goal is to pay it off before I retire which I certainly hope is well before I turn 74.

It seems I can go one of two ways here: I can make extra mortgage payments and pay it down that way or I can invest the funds that I would otherwise use to make the extra mortgage payments and put it in a stocked based mutual fund with the thought of selling the mutual fund down the road to pay off the mortgage.

Since we will no longer be itemizing the cost of the loan is truly 4.5% so paying down the mortgage is similar to a 6.1% return in the stock market assuming a combined federal capital gain rate and state tax rate of 26%.

So would you do?
 
I have a 30 year mortgage on a house we bought last year. The interest rate is 4.5% and we will not be itemizing on our tax returns going forward assuming the standard deduction stays at $24K. I will be 74 before it's paid off so my goal is to pay it off before I retire which I certainly hope is well before I turn 74.

It seems I can go one of two ways here: I can make extra mortgage payments and pay it down that way or I can invest the funds that I would otherwise use to make the extra mortgage payments and put it in a stocked based mutual fund with the thought of selling the mutual fund down the road to pay off the mortgage.

Since we will no longer be itemizing the cost of the loan is truly 4.5% so paying down the mortgage is similar to a 6.1% return in the stock market assuming a combined federal capital gain rate and state tax rate of 26%.

So would you do?
That makes my head hurt, lol. I make extra payments. Didn't have the balls to do a 15 yr.
 
I'll say this.

The peace of mind you'll get by having the house paid off is wonderful ……. each day, every day.
You can't put a price on peace of mind.

Also;
Look into getting an Equity Accelerator package with someone.
You pretty much pay 1/2 a mortgage payment every 2 weeks, which keeps the interest down.
You will end up paying at least 1 extra mortgage payment every year, which also helps.
(The nicest thing is it's super easy to change how much they take out, so when times are good you can have them take out more and when times are lean, you can back it back down.)

My 30 year mortgage was paid off in 13 years this way and I credit the Equity Accelerator package I had (with Chase I think) for making it happen.

(You're certainly not going to get any peace of mind hoping the invested money has a good return...)

Good luck!
 
I had the same decision. I paid it off (when I could still itemize even) and it saved my bacon.
Mortgage interest is a known cost. Stock market income is a hoped for assumption. Everyone's risk tolerance is different. For me it was about reducing/eliminating mandatory cash outflows asap.
 
I was young and single (and not really into guns at the time) and was debt-free at 33 after paying off my condo mortgage.

There is NOTHING IN THIS WORLD like paying yourself that monthly mortgage payment once you no longer have payments to make to the bank.

Then I got married and had kids and well, not exactly debt-free anymore...
 
I think long term it would be better if you paid down debt as you can now. You are asssumig capital gains rates are going to be the same in 15-20 years when you are ready to cash out which if the dems get control back you could get burned badly on that.
 
I have a 30 year mortgage on a house we bought last year. The interest rate is 4.5% and we will not be itemizing on our tax returns going forward assuming the standard deduction stays at $24K. I will be 74 before it's paid off so my goal is to pay it off before I retire which I certainly hope is well before I turn 74.

It seems I can go one of two ways here: I can make extra mortgage payments and pay it down that way or I can invest the funds that I would otherwise use to make the extra mortgage payments and put it in a stocked based mutual fund with the thought of selling the mutual fund down the road to pay off the mortgage.

Since we will no longer be itemizing the cost of the loan is truly 4.5% so paying down the mortgage is similar to a 6.1% return in the stock market assuming a combined federal capital gain rate and state tax rate of 26%.

So would you do?

Just have a bunch of kids and you won’t be wondering where to put your extra cash. Also have a stay at home wife to look after the kids. That recipe will definitely take care of any extra funds. Problem solved!!!
 
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