Payoff the Mortgage or Invest?

[Alaskan]

Payoff, debt is dumb (always do a 15 year). Invest afterwards, use the money you would use for the payments as your investment money.

 

[chucklenut]

I find the best way to make and keep money is to not borrow to begin with

 

[czub]

Payoff, debt is dumb. Invest afterwards, use the money you would use for the payments as your investment money.

To use a forum-relevant analogy, debt is like a gun, in wrong hands it will destroy you, used intelligently and carefully it's a useful tool.

There's a big difference between using debt to buy a house or truck you will drive to work or use to make a living and financing your 65" TV with a credit card or taking out a HELOC to pay for a nice vacation.

 

[WinstonSmith]

Pay off the house then invest the same amount as your mortgage payment every month? Personally I would prefer a lower monthly nut. Then you can invest in anything you want instead of putting all your cash into mutual funds. May come a day where investing in something else is more advantageous. Like long term food storage, ammo, and training says tinfoil hat me. More and more, I have less and less faith in the dollar, wall street, funds where gov can tax or confiscate, etc.

 

[Greg_D]

The basic Dave Ramsey Baby-Steps(Debt or Retirement Snowball):
1) save 6-month emergency fund
2) pay off all credit cards
3) fund 401k up to Company Match
4) fund Roth IRA($6000 for 2019)
5) Max out 401K($19000 for 2019)
6) increase monthly mortgage payment until paid off
7) Debt Free
>>> it was slow progress the first 5yrs but then things really "snowball", it took me 15yrs but I made it to step 7.

 

[Vincent Vega]

You can't directly compare the two options based on after-tax return alone since risk profile is drastically different.
Prepaying your mortgage is a guaranteed 4.5% after-tax return, or 6.1% gross in your case, which you won't get in the market. The general answer is to split your money and do both but only after you have at least 6 months of expenses in liquid funds. The hard part is figuring out the split, but that's a typical portfolio allocation exercise that depends on things like your overall net worth, income security, years until retirement and risk tolerance.
FWIW, our 30 year mortgage is only 3.25% but my wife still sends extra every month to be done with the mortgage before our oldest goes to college.

I think you've nailed it. I'm wrestling with how to split the funds I'm willing to invest/pay down the mortgage. I also agree with your analogy regarding debt.

 

[GeauxLSU]

Prepaying your mortgage is a guaranteed 4.5% after-tax return, or 6.1% gross in your case, which you won't get in the market.

Yep, and try finding a guaranteed 6% return anywhere. You won't. Add to that if you are investing in savings instruments or the market your cash investment is then subject to inflation (-2% or so) so in reality, anything guaranteed investment wise is probably break even if you are lucky.
Your interest saving on the mortgage is guaranteed and 'most' homes in decent areas appreciate faster than inflation.

In case no one has mentioned it, PAY OFF THE MORTGAGE!

 

[ShooterG]

Yep, and try finding a guaranteed 6% return anywhere. You won't. Add to that if you are investing in savings instruments or the market your cash investment is then subject to inflation (-2% or so) so in reality, anything guaranteed investment wise is probably break even if you are lucky.
Your interest saving on the mortgage is guaranteed and 'most' homes in decent areas appreciate faster than inflation.

In case no one has mentioned it, PAY OFF THE MORTGAGE!

As far as inflation - doesnt that actually benefit the borrower and encourage keeping the mortgage? I HOPE inflation doesnt outweigh the interest rate...but you are paying off todays loan with tomorrows inflated dollar?

 

[jeep78]

As far as inflation - doesnt that actually benefit the borrower and encourage keeping the mortgage? I HOPE inflation doesnt outweigh the interest rate...but you are paying off todays loan with tomorrows inflated dollar?

Your investment also pays off in tomorrow's inflated dollars.

 

[ShooterG]

Your investment also pays off in tomorrow's inflated dollars.

But that HURTS the investment. Tomorrows dollars are worth less.

I dont know which is better - I'll ignore inflation!