Payoff the Mortgage or Invest?

[czub]

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?

4% is 4% unless it's not.
It's an annualized rate, same as your stock market return or interest on a savings account. When you invest in the stock market, you also [hope to] get a return every year.

One wrinkle is tax treatment. For most of us here mortgage interest is effectively no longer deductible since the tax reform made taking a standard deduction more beneficial. This means you're paying mortgage interest, and save on mortgage interest by prepaying, with aftertax dollars. To compare to other investing options, you need to figure out an equivalent pretax rate which for 4% should be somewhere in 5.0%-6.5% range depending on many individual factors.

 

[GFB]

If a person has a low interest rate now, I'm fairly certain it will look like a bargain 10 years from now. Interest rates won't stay this low, historical averages would seem to indicate. Not trying to say one answer is clearly better than another. However, it's worth considering that both interest rates and inflation aren't likely to stay this low. Might be worth considering depending on your timeline.

 

[Smoothie]

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

Why would he do that when get can get FREE advice here?

 

[Smoothie]

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

Which is highly unlikely

Right, it's actually HIGHER.

https://www.google.com/amp/s/www.fo...tocks-fared-the-last-50-years-youll-be-s.aspx

 

[roundhouse]

Right, it's actually HIGHER.

https://www.google.com/amp/s/www.fo...tocks-fared-the-last-50-years-youll-be-s.aspx

Article also points out that’s assuming no fees

And most stock market investments are eat up with fees

 

[Smoothie]

Article also points out that’s assuming no fees

And most stock market investments are eat up with fees

I really don't know why you keep posting in this thread and pretending you actually know what you are talking about.

What are the fees YOU are currently paying on your stock portfolio?

 

[GFB]

Article also points out that’s assuming no fees

And most stock market investments are eat up with fees

Low cost, no-load funds made Vanguard very popular. Dave Ramsey gets paid to pimp loaded funds, by the way.

 

[TheGman]

Well from experience I can tell you that having no mortgage feels great.

There is no reason why you cannot invest and pay down mortgage simultaneously. Throw $$ toward mortgage (principal payment) and invest in mutual funds by $$ cost averaging.

The good news is that your savvy enough to be determining which is best versus just spending discretionary income.

 

[Vincent Vega]

I'm currently in two no load mutual funds in taxable / non-retirement accounts. One is with Vanguard and one is with Fidelity. The fees charged are 0.08% and 0.11%, respectively. The cost of these funds for 10,000 invested over 10 years is $189 (assuming a 9% annual return) and $164 (assuming a 5% annual return), respectively. That's really cheap so I don't know how someone could say it's expensive to invest.

Also, I don't know of any major brokerage house that charges a fee to hold an individual's stock portfolio.

roundhouse , to your point I made the mistake of letting a bank that I have a relationship with invest for me several years ago. I gave them half of an IRA that I had and kept the other half in a broad-based index fund with Fidelity. The bank charged me 1% annually to actively manage my assets. This was roughly 0.9% more than I was paying at Fidelity through the index investment but they felt confident they could provide returns that would beat the returns I was getting at Fidelity. Fine. Game on. I told them that we were going to reassess our relationship in a year based on their results. Well after a year I had $18K less at the bank than I did at Fidelity. Needless to say I no longer have any investments at the bank. It seems this bank has a new investment adviser every 6 months so every six months the new dude tries to talk me into investing with them again. I quickly tell them "NO" and then gladly tell them why usually followed by a long silence and crickets.

 

[chucklenut]

If a person has a low interest rate now, I'm fairly certain it will look like a bargain 10 years from now. Interest rates won't stay this low, historical averages would seem to indicate. Not trying to say one answer is clearly better than another. However, it's worth considering that both interest rates and inflation aren't likely to stay this low. Might be worth considering depending on your timeline.

It depends on who/where you borrow from

But your statement is true for us that rely on credit scores assigned by the 3