Payoff the Mortgage or Invest?

[ShooterG]

Well as of March 5th so for far I've reduced the principal by around $1650. I made much of that yesterday.

Y'all made me run numbers lol. A couple of comments: I'm only 9 months into a 30 year mortgage. The total prepayment has knocked off only 4 months off the original loan but it will have saved me $4457 in interest over the life of the loan. If I stuck $1650 in an investment returning 6% per year, compounded and assuming none of that 6% is taxed (I assumed stock growth and no dividends) then it appears I would be in the same position in year 27 assuming I sold the investment that year and was taxed at a combined federal and state rate of 26%

Math aside - I commend you for the extra principal reduction made. Now only 347 payments left!

 

[ShooterG]

Financial analysis is worthless unless you factor in your death (another variable).

If your house is paid off and you die...you have pretty much elected to either:
1) pay the death tax (if you're not married)...which is huge...the gov't take a cut and leaves your estate with a lot less...
2) provided a home to the guy that will marry your wife and live in the house you paid for...

Either way, there is a case made for paying off the mortgage and not paying off the mortgage
You have to decide...do you live like a prince or the pauper...but you die at the end no matter what

I look forward to the day I'm concerned with the death tax.

 

[roundhouse]

Well as of March 5th so for far I've reduced the principal by around $1650. I made much of that yesterday.

Y'all made me run numbers lol. A couple of comments: I'm only 9 months into a 30 year mortgage. The total prepayment has knocked off only 4 months off the original loan but it will have saved me $4457 in interest over the life of the loan. If I stuck $1650 in an investment returning 6% per year, compounded and assuming none of that 6% is taxed (I assumed stock growth and no dividends) then it appears I would be in the same position in year 27 assuming I sold the investment that year and was taxed at a combined federal and state rate of 26%

Yeah
That’s the part that is usually overlooked

Y’all expert eggheads chime in here and correct me if I’m wrong
I barely graduated high school , and flunked a lot of math classes .


But as I understand it , When you prepay , your gain or return is whatever your interest rate is ,let’s say it’s 4%
Sure you can usually make 4% gain in the stock market

But when you prepay , you’re getting that 4% return multiplied by EVERY YEAR that’s left on your mortgage

If you have 27 years left , you’re getting a 4% return , 27 times

Correct?

 

[roundhouse]

Financial analysis is worthless unless you factor in your death (another variable).

If your house is paid off and you die...you have pretty much elected to either:
1) pay the death tax (if you're not married)...which is huge...the gov't take a cut and leaves your estate with a lot less...
2) provided a home to the guy that will marry your wife and live in the house you paid for...

Either way, there is a case made for paying off the mortgage and not paying off the mortgage
You have to decide...do you live like a prince or the pauper...but you die at the end no matter what

The estate tax kicks in at what , $10 million in assets ?

If you have more than $10 million, you need to see an accountant and lawyer about setting up some trusts and LLCs to shelter the estate tax

Easy to do

Y’all don’t think rich people actually pay taxes do you ?

 

[ShooterG]

Yeah
That’s the part that is usually overlooked

Y’all expert eggheads chime in here and correct me if I’m wrong
I barely graduated high school , and flunked a lot of math classes .


But as I understand it , When you prepay , your gain or return is whatever your interest rate is ,let’s say it’s 4%
Sure you can usually make 4% gain in the stock market

But when you prepay , you’re getting that 4% return multiplied by EVERY YEAR that’s left on your mortgage

If you have 27 years left , you’re getting a 4% return , 27 times

Correct?

If you invest it - you get the investment return every year as well.

 

[roundhouse]

If you invest it - you get the investment return every year as well.

If there think there is a 4% guaranteed return every year for 27 years in a row

Which is highly unlikely

 

[Vincent Vega]

Financial analysis is worthless unless you factor in your death (another variable).

If your house is paid off and you die...you have pretty much elected to either:
1) pay the death tax (if you're not married)...which is huge...the gov't take a cut and leaves your estate with a lot less...
2) provided a home to the guy that will marry your wife and live in the house you paid for...

Either way, there is a case made for paying off the mortgage and not paying off the mortgage
You have to decide...do you live like a prince or the pauper...but you die at the end no matter what

I believe I'm well below the death tax threshold and since I am married I believe the transfer of my assets to my better half is tax free anyway. If I die I think she'll be in pretty good shape (I've got a couple of substantial life insurance policies but don't tell her lol). Also, what she does after I'm gone won't bother me cause well...I'll be dead.

 

[Vincent Vega]

Math aside - I commend you for the extra principal reduction made. Now only 347 payments left!

lol

 

[Vincent Vega]

The estate tax kicks in at what , $10 million in assets ?

If you have more than $10 million, you need to see an accountant and lawyer about setting up some trusts and LLCs to shelter the estate tax

Easy to do

Y’all don’t think rich people actually pay taxes do you ?

If I had $10 million I know I wouldn't be concerned with paying off the mortgage!

 

[Scorpius]

I believe I'm well below the death tax threshold and since I am married I believe the transfer of my assets to my better half is tax free anyway. If I die I think she'll be in pretty good shape (I've got a couple of substantial life insurance policies but don't tell her lol). Also, what she does after I'm gone won't bother me cause well...I'll be dead.

True this. Additionally the comment about the next guy. For me not an issue. Why would I not want my wife to find happiness? If I’m dead and gone last thing I want is for her to stop living. After all I love her, why would I not want her to be happy when I’m gone?



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