should I pay off my mortgage early?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
cabfranc
Posts: 272
Joined: Tue Jun 25, 2019 12:46 pm

Re: should I pay off my mortgage early?

Post by cabfranc »

RoadagentMN wrote: Sat Sep 11, 2021 9:12 am
simple man wrote: Fri Sep 10, 2021 5:04 pm You DONT know the investment option will be better. You could lose it all! You just never know. The flip side is if you pay down the house it is like getting a guaranteed 2.25% return. Where can you get that right now? (and dont forget to factor in taxes on investments). The more important part for me though is mental. When the crash hit in 08, my whole block was freaking out - how were they going to pay the house debt??? We did not have that worry and were fine...You will feel great once you are out of debt!
100% Correct - Boggles huff and puff about risk mitigation and historical returns, but then focus on strategies based on the past few years of market performance lol.
I don't think most people would disagree that eliminating the mortgage reduces risk. However, the OP was not asking about eliminating the mortgage. They were asking about sending extra monthly payments. That also carries risk until the mortgage is paid off. If OP pays an extra $1500 per month and then for some reason cannot make the mortgage payment and still owes money on the house, the bank likely does not care.
lakpr
Posts: 11612
Joined: Fri Mar 18, 2011 9:59 am

Re: should I pay off my mortgage early?

Post by lakpr »

cabfranc wrote: Sat Sep 11, 2021 11:10 am I don't think most people would disagree that eliminating the mortgage reduces risk. However, the OP was not asking about eliminating the mortgage. They were asking about sending extra monthly payments. That also carries risk until the mortgage is paid off. If OP pays an extra $1500 per month and then for some reason cannot make the mortgage payment and still owes money on the house, the bank likely does not care.
Has been pointed out earlier in the thread: "recasting" eliminates this liquidity risk. My previous mortgage company asked for $250 fees for this recasting, and up thread responses indicate Wells Fargo is willing to do this for free if your prepayment is at least $20k.
Last edited by lakpr on Sat Sep 11, 2021 1:17 pm, edited 1 time in total.
coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: should I pay off my mortgage early?

Post by coachd50 »

cabfranc wrote: Sat Sep 11, 2021 11:06 am
willthrill81 wrote: Sat Sep 11, 2021 9:38 am
JonL wrote: Thu Sep 09, 2021 6:51 pm
Swennerb wrote: Wed Sep 08, 2021 8:06 pm
is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
When clients ask me this, my answer is usually something like this:

What's the stock/bond mix across all your accounts? If the answer *isn't* 100%, then pay off your mortgage. Otherwise, you're borrowing at 2.25% to invest at 1.3%.

If you are 100% stocks - and you want to take on *more* risk for the *chance* that you *might* make more in the stock market than what you're paying in interest - then *not* pre-paying your mortgage can make sense.

I hope that helps. :happy

Good luck! :beer
+1

Borrowing at a likely post-tax 2.25% only to lend at a pre-tax 1.3% is negative arbitrage and should only be done if the liquidity it provides is genuinely needed. Behaving otherwise is mental accounting, at best.
I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Keep in mind the comparison is referring to the portion of portfolio in bonds. When someone makes that statement, they are not suggesting that the investor is only earning the (for example) 1.3% pre tax bond rate. They are pointing out that the investor is essentially paying a premium to get the "expected portfolio return at a given AA", because the investor is choosing to pay 2.25% (or whatever) to borrow money only to turn around an loan it to someone for a lower return.
RoadagentMN
Posts: 158
Joined: Tue Jun 08, 2021 11:09 am

Re: should I pay off my mortgage early?

Post by RoadagentMN »

cabfranc wrote: Sat Sep 11, 2021 11:06 am
willthrill81 wrote: Sat Sep 11, 2021 9:38 am
JonL wrote: Thu Sep 09, 2021 6:51 pm
Swennerb wrote: Wed Sep 08, 2021 8:06 pm
is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
When clients ask me this, my answer is usually something like this:

What's the stock/bond mix across all your accounts? If the answer *isn't* 100%, then pay off your mortgage. Otherwise, you're borrowing at 2.25% to invest at 1.3%.

If you are 100% stocks - and you want to take on *more* risk for the *chance* that you *might* make more in the stock market than what you're paying in interest - then *not* pre-paying your mortgage can make sense.

I hope that helps. :happy

Good luck! :beer
+1

Borrowing at a likely post-tax 2.25% only to lend at a pre-tax 1.3% is negative arbitrage and should only be done if the liquidity it provides is genuinely needed. Behaving otherwise is mental accounting, at best.
I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Because you need to maintain a parallel comparison, the debt owed is 100% guaranteed to be due, ( legally memorialized) therefore you need a equally guaranteed rate of return. Again the word is guaranteed. Future projections statements are just that - projections. Yeah, 2007/2008 was real fun lol
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: should I pay off my mortgage early?

Post by willthrill81 »

cabfranc wrote: Sat Sep 11, 2021 11:06 am
willthrill81 wrote: Sat Sep 11, 2021 9:38 am
JonL wrote: Thu Sep 09, 2021 6:51 pm
Swennerb wrote: Wed Sep 08, 2021 8:06 pm
is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
When clients ask me this, my answer is usually something like this:

What's the stock/bond mix across all your accounts? If the answer *isn't* 100%, then pay off your mortgage. Otherwise, you're borrowing at 2.25% to invest at 1.3%.

If you are 100% stocks - and you want to take on *more* risk for the *chance* that you *might* make more in the stock market than what you're paying in interest - then *not* pre-paying your mortgage can make sense.

I hope that helps. :happy

Good luck! :beer
+1

Borrowing at a likely post-tax 2.25% only to lend at a pre-tax 1.3% is negative arbitrage and should only be done if the liquidity it provides is genuinely needed. Behaving otherwise is mental accounting, at best.
I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
There shouldn't be an expectation that bonds will beat the 2.25% mortgage interest rate, especially after taxes. Therefore, it only makes sense to borrow at 2.25% to invest in stocks (assuming we're talking about only stocks and bonds as potential investments). Conflating this by saying that one will be buying a mix of both stocks and bonds obscures this reality. Apart from a genuine need for liquidity or a behavioral concern stemming from mental accounting, borrowing at 2.25% only to lend at 1.3% is illogical. Buying stocks and bonds with some of the borrowed funds doesn't change this.
The Sensible Steward
User avatar
nps
Posts: 1633
Joined: Thu Dec 04, 2014 9:18 am

Re: should I pay off my mortgage early?

Post by nps »

cabfranc wrote: Sat Sep 11, 2021 11:06 am
willthrill81 wrote: Sat Sep 11, 2021 9:38 am +1

Borrowing at a likely post-tax 2.25% only to lend at a pre-tax 1.3% is negative arbitrage and should only be done if the liquidity it provides is genuinely needed. Behaving otherwise is mental accounting, at best.
I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
A stock/bond AA is not somehow inseparable. It is stocks and bonds. Even if invested in a single fund like a target retirement fund, there is an equivalent set of investments that would be one (or more) stock funds and one (or more) bond funds. So the bond vs. mortgage return can be directly compared without bringing stocks into it.
hudson
Posts: 7119
Joined: Fri Apr 06, 2007 9:15 am

Re: should I pay off my mortgage early?

Post by hudson »

Swennerb wrote: Wed Sep 08, 2021 8:06 pm I am 38 yo and have a desire to pay off my mortgage early but I’m not sure what is the best way. Here’s my details ;

Emergency fund: 20,000$ or about 6 mos
Retirement accnts are maxed out
Debt: only my mortgage which is currently at 288,000$
Bought my house at 330,000$ 2 years ago
It’s on a 15 year mortgage at 2.25%
Current monthly payment is $2,450/ month
I can make an extra payment of up to 1500$/month and the loan would be paid off in 6 years.
Tax Filing Status: single
Question:
-What options or ways are there to potentially apply this
extra 1500$/ month?
-Should I put it in a savings Accnt and then pay it off in a lump sum vs just making the extra payment every month?
- At this low interest rate, is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
Thanks for looking.
When I was 38, I also had the desire to pay my mortgage off early. Some months I doubled up on payments; sometimes I did triple payments; sometimes I couldn't. I wanted that payment to go away before my children went to college and well before retirement.
I would never take money out of investments to make a payment; I would only use current income.

Bottom Line: I would pay it down every month as possible.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: should I pay off my mortgage early?

Post by JoeRetire »

cabfranc wrote: Sat Sep 11, 2021 11:06 am I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Because yada, yada, risk, yada, yada, mortgage is a negative bond, yada, yada.

(I agree with you)
This isn't just my wallet. It's an organizer, a memory and an old friend.
coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: should I pay off my mortgage early?

Post by coachd50 »

JoeRetire wrote: Sun Sep 12, 2021 11:54 am
cabfranc wrote: Sat Sep 11, 2021 11:06 am I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Because yada, yada, risk, yada, yada, mortgage is a negative bond, yada, yada.

(I agree with you)
There are tons of LONG threads on the "negative bond" topic, so I won't venture there. However objectively, in the situations being described you are borrowing money at 2.5% (or whatever) and loaning it out for less. Right?
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: should I pay off my mortgage early?

Post by JoeRetire »

coachd50 wrote: Sun Sep 12, 2021 3:14 pm
JoeRetire wrote: Sun Sep 12, 2021 11:54 am
cabfranc wrote: Sat Sep 11, 2021 11:06 am I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Because yada, yada, risk, yada, yada, mortgage is a negative bond, yada, yada.

(I agree with you)
There are tons of LONG threads on the "negative bond" topic, so I won't venture there. However objectively, in the situations being described you are borrowing money at 2.5% (or whatever) and loaning it out for less. Right?
I'm not. I don't know what situations you are referring to.
This isn't just my wallet. It's an organizer, a memory and an old friend.
coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: should I pay off my mortgage early?

Post by coachd50 »

JoeRetire wrote: Sun Sep 12, 2021 6:54 pm
coachd50 wrote: Sun Sep 12, 2021 3:14 pm
JoeRetire wrote: Sun Sep 12, 2021 11:54 am
cabfranc wrote: Sat Sep 11, 2021 11:06 am I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Because yada, yada, risk, yada, yada, mortgage is a negative bond, yada, yada.

(I agree with you)
There are tons of LONG threads on the "negative bond" topic, so I won't venture there. However objectively, in the situations being described you are borrowing money at 2.5% (or whatever) and loaning it out for less. Right?
I'm not. I don't know what situations you are referring to.
The entire situation described here. Anytime an investor carrying a mortgage chooses to invest money in a bonds / bond fund with a lower yield than the mortgage rate as opposed to paying towards / paying off that loan. Which is why people compare the mortgage interest rate to bonds at 1.3%
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: should I pay off my mortgage early?

Post by JoeRetire »

coachd50 wrote: Sun Sep 12, 2021 7:19 pm
JoeRetire wrote: Sun Sep 12, 2021 6:54 pm
coachd50 wrote: Sun Sep 12, 2021 3:14 pm
JoeRetire wrote: Sun Sep 12, 2021 11:54 am
cabfranc wrote: Sat Sep 11, 2021 11:06 am I don't understand why the mortgage interest rate is compared to bonds at 1.3% unless someone is investing only in bonds. Presumably someone is investing a portfolio with a stock/bond AA. Why not compare the expected portfolio return at a given AA to the mortgage rate?
Because yada, yada, risk, yada, yada, mortgage is a negative bond, yada, yada.

(I agree with you)
There are tons of LONG threads on the "negative bond" topic, so I won't venture there. However objectively, in the situations being described you are borrowing money at 2.5% (or whatever) and loaning it out for less. Right?
I'm not. I don't know what situations you are referring to.
The entire situation described here. Anytime an investor carrying a mortgage chooses to invest money in a bonds / bond fund with a lower yield than the mortgage rate as opposed to paying towards / paying off that loan. Which is why people compare the mortgage interest rate to bonds at 1.3%
The question I answered was "Why not compare the expected portfolio return at a given AA to the mortgage rate?"

In that situation, we don't know the given AA, but we can assume it isn't solely bonds/bond fund, don't you agree?
This isn't just my wallet. It's an organizer, a memory and an old friend.
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: should I pay off my mortgage early?

Post by harikaried »

cabfranc wrote: Sat Sep 11, 2021 11:06 amWhy not compare the expected portfolio return at a given AA to the mortgage rate?
Instead of borrowing $100 paying $2.25/yr interest to invest $80 equities and $20 bonds yielding 26¢/yr for a net cost of $1.99/yr, one could borrow $20 less and invest it all in equities (while effectively maintaining the same net asset allocation) and only need to pay back $1.80/yr interest.
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

harikaried wrote: Mon Sep 13, 2021 5:11 am
cabfranc wrote: Sat Sep 11, 2021 11:06 amWhy not compare the expected portfolio return at a given AA to the mortgage rate?
Instead of borrowing $100 paying $2.25/yr interest to invest $80 equities and $20 bonds yielding 26¢/yr for a net cost of $1.99/yr, one could borrow $20 less and invest it all in equities (while effectively maintaining the same net asset allocation) and only need to pay back $1.80/yr interest.
This logic assumes people hold or buy bonds for their return. Today at least, most people do not. By this logic nobody should hold cash, or a savings account, or a low yield CD, or any instrument that has an interest rate lower than their mortgage rate. It's fine if one subscribes to such logic, but not everyone does.

The 100% stock crowd was noticeably quiet in March, 2020, in 2009, et cetera.
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: should I pay off my mortgage early?

Post by harikaried »

Admiral wrote: Mon Sep 13, 2021 5:58 amBy this logic nobody should hold cash, or a savings account, or a low yield CD, or any instrument that has an interest rate lower than their mortgage rate
I explained to OP's original questions earlier in this thread that holding cash would be reasonable if there's a need. People can hold cash, bonds, etc. as they can provide value other than returns. There can be diminishing returns on the provided value, so some decide to look at optimizing yields.
bradpevans
Posts: 801
Joined: Sun Apr 08, 2018 1:09 pm

Re: should I pay off my mortgage early?

Post by bradpevans »

hudson wrote: Sun Sep 12, 2021 11:45 am
Swennerb wrote: Wed Sep 08, 2021 8:06 pm I am 38 yo and have a desire to pay off my mortgage early but I’m not sure what is the best way. Here’s my details ;

Emergency fund: 20,000$ or about 6 mos
Retirement accnts are maxed out
Debt: only my mortgage which is currently at 288,000$
Bought my house at 330,000$ 2 years ago
It’s on a 15 year mortgage at 2.25%
Current monthly payment is $2,450/ month
I can make an extra payment of up to 1500$/month and the loan would be paid off in 6 years.
Tax Filing Status: single
Question:
-What options or ways are there to potentially apply this
extra 1500$/ month?
-Should I put it in a savings Accnt and then pay it off in a lump sum vs just making the extra payment every month?
- At this low interest rate, is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
Thanks for looking.
When I was 38, I also had the desire to pay my mortgage off early. Some months I doubled up on payments; sometimes I did triple payments; sometimes I couldn't. I wanted that payment to go away before my children went to college and well before retirement.
I would never take money out of investments to make a payment; I would only use current income.

Bottom Line: I would pay it down every month as possible.
i get the mental upside of no house payment ... but didn't you essentially take money out of *potential* investments to pay down the mortgage? (in other words the "extra" payments could have been invested)
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

bradpevans wrote: Mon Sep 13, 2021 6:39 am
hudson wrote: Sun Sep 12, 2021 11:45 am
Swennerb wrote: Wed Sep 08, 2021 8:06 pm I am 38 yo and have a desire to pay off my mortgage early but I’m not sure what is the best way. Here’s my details ;

Emergency fund: 20,000$ or about 6 mos
Retirement accnts are maxed out
Debt: only my mortgage which is currently at 288,000$
Bought my house at 330,000$ 2 years ago
It’s on a 15 year mortgage at 2.25%
Current monthly payment is $2,450/ month
I can make an extra payment of up to 1500$/month and the loan would be paid off in 6 years.
Tax Filing Status: single
Question:
-What options or ways are there to potentially apply this
extra 1500$/ month?
-Should I put it in a savings Accnt and then pay it off in a lump sum vs just making the extra payment every month?
- At this low interest rate, is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
Thanks for looking.
When I was 38, I also had the desire to pay my mortgage off early. Some months I doubled up on payments; sometimes I did triple payments; sometimes I couldn't. I wanted that payment to go away before my children went to college and well before retirement.
I would never take money out of investments to make a payment; I would only use current income.

Bottom Line: I would pay it down every month as possible.
i get the mental upside of no house payment ... but didn't you essentially take money out of *potential* investments to pay down the mortgage? (in other words the "extra" payments could have been invested)
Agree this is mental accounting on some level. That said, I do think, once one has sufficient assets, there's a good case to be made for no mortgage at retirement age (whenever one expects that to be). There's less of a financial case for killing it before kids are in college, since holding a mortgage can be be beneficial in terms of FAFSA and financial aid (assuming one qualifies or needs to).

I think many of those who are under, say, 35 have a very skewed view of how much mortgages have cost in historical terms... and how amazingly cheap this money is now. Thus all the hand-wringing about a 1% delta in bond and mortgage rates. Overall this is a very good problem to have. (Now, whether or not it's a good thing that low rates are pushing housing costs up depends on whether you're in the market, selling, or staying put.)
lobsterman2112
Posts: 74
Joined: Fri Dec 18, 2020 6:53 am

Re: should I pay off my mortgage early?

Post by lobsterman2112 »

If you're the sort of person who will invest the extra money and not just buy (stuff), go ahead and invest.

On the other hand, if you have a little trouble saving monay, better to pay off the mortgage.

Another thought: If you're not sure what your risk tolerance is, how to invest without an investment manager, or the difference between index investing vs. buying managed funds or individual stocks, pay off the mortgage and use the next several months browsing this forum and learning a few things.

Once you get more comfortable, then decide if you'd rather live without a mortgage but with lower investment balances or with a mortgage and higher investment balances. :beer
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: should I pay off my mortgage early?

Post by KlangFool »

Admiral wrote: Mon Sep 13, 2021 7:51 am

Agree this is mental accounting on some level. That said, I do think, once one has sufficient assets, there's a good case to be made for no mortgage at retirement age (whenever one expects that to be). There's less of a financial case for killing it before kids are in college, since holding a mortgage can be be beneficial in terms of FAFSA and financial aid (assuming one qualifies or needs to).

I think many of those who are under, say, 35 have a very skewed view of how much mortgages have cost in historical terms... and how amazingly cheap this money is now. Thus all the hand-wringing about a 1% delta in bond and mortgage rates. Overall this is a very good problem to have. (Now, whether or not it's a good thing that low rates are pushing housing costs up depends on whether you're in the market, selling, or staying put.)
Admiral,

And, from my point of view, until someone is financially independent, the person does not have sufficient asset. Some folks declared victory too early based on their optimistic sunny projection. Then, the rain starts and their liquidity are tied up in the house. But, it would be too late by that time.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
User avatar
hornet96
Posts: 811
Joined: Sun Nov 25, 2012 5:45 pm

Re: should I pay off my mortgage early?

Post by hornet96 »

It is really quite fascinating to me to watch the mantra of "look at the portfolio as a whole, not its individual components" evaporate right before our eyes, when these mortgage prepayment threads come up. Suddenly, bonds in the portfolio can and should be looked at in isolation if you have a mortgage.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: should I pay off my mortgage early?

Post by JoeRetire »

lobsterman2112 wrote: Mon Sep 13, 2021 7:55 amOn the other hand, if you have a little trouble saving monay, better to pay off the mortgage.
Kind of a Christmas Club thing.

If you can't save well, give your money to someone else to save it for you. Sure, it will cost you more, but you'll be forced to save.
This isn't just my wallet. It's an organizer, a memory and an old friend.
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: should I pay off my mortgage early?

Post by harikaried »

hornet96 wrote: Mon Sep 13, 2021 2:49 pmmantra of "look at the portfolio as a whole, not its individual components" evaporate right before our eyes, when these mortgage prepayment threads come up
If someone asked, "I have $100k equities and $0 bonds -- can I just pretend that's actually an 80/20 asset allocation?" The obvious answer is no because equities don't act like bonds. Mortgage with interest payments are similar in various aspects to bonds with yield payments.

For example, if you have a 30-year conforming loan from a big or small bank sold to Fannie Mae or Freddie Mac, your mortgage interest payments might actually be yielding some of Total Bond Market BND where if you look at the holdings, Federal National Mortgage Assn. 2% coupon is 2.65% weight and Federal Home Loan Mortgage Corp. 3.5% coupon is 0.50% weight (in addition to a lot of other holdings). That's quite the indirect / inefficient way to send yourself money.
User avatar
hornet96
Posts: 811
Joined: Sun Nov 25, 2012 5:45 pm

Re: should I pay off my mortgage early?

Post by hornet96 »

harikaried wrote: Mon Sep 13, 2021 3:40 pm
hornet96 wrote: Mon Sep 13, 2021 2:49 pmmantra of "look at the portfolio as a whole, not its individual components" evaporate right before our eyes, when these mortgage prepayment threads come up
If someone asked, "I have $100k equities and $0 bonds -- can I just pretend that's actually an 80/20 asset allocation?" The obvious answer is no because equities don't act like bonds. Mortgage with interest payments are similar in various aspects to bonds with yield payments.

For example, if you have a 30-year conforming loan from a big or small bank sold to Fannie Mae or Freddie Mac, your mortgage interest payments might actually be yielding some of Total Bond Market BND where if you look at the holdings, Federal National Mortgage Assn. 2% coupon is 2.65% weight and Federal Home Loan Mortgage Corp. 3.5% coupon is 0.50% weight (in addition to a lot of other holdings). That's quite the indirect / inefficient way to send yourself money.
I understand how bonds and mortgages work. I also understand how portfolio construction works, which is conveniently ignored when mortgage threads come up. Apparently, if you have a mortgage, you should never own any bonds until it's paid off. Talk about a poor portfolio construction technique.
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

harikaried wrote: Mon Sep 13, 2021 3:40 pm
hornet96 wrote: Mon Sep 13, 2021 2:49 pmmantra of "look at the portfolio as a whole, not its individual components" evaporate right before our eyes, when these mortgage prepayment threads come up
If someone asked, "I have $100k equities and $0 bonds -- can I just pretend that's actually an 80/20 asset allocation?" The obvious answer is no because equities don't act like bonds. Mortgage with interest payments are similar in various aspects to bonds with yield payments.

For example, if you have a 30-year conforming loan from a big or small bank sold to Fannie Mae or Freddie Mac, your mortgage interest payments might actually be yielding some of Total Bond Market BND where if you look at the holdings, Federal National Mortgage Assn. 2% coupon is 2.65% weight and Federal Home Loan Mortgage Corp. 3.5% coupon is 0.50% weight (in addition to a lot of other holdings). That's quite the indirect / inefficient way to send yourself money.
The argument you are making does not appear to be one that most people disagree with: Yes, if your mortgage rate is higher than your bond yield, on some level you are lending out more than you are taking in.

The point you are missing is not that bonds are a wonderful, high-yielding investment that everyone should buy rather than pre-pay their mortgage. It's that holding bonds is a way to preserve capital that ALSO provides optionality. Mortgages have two primary features: the rate is fixed, and the money put into them is illiquid, unless one is willing to pay interest to get it, or sell the house.

If I pay $1500 extra per month toward my mortgage, I get a guaranteed, fixed rate of return, and no access to my funds. If I invest that same $1500 [added: IN BONDS], I also get a guaranteed return, in this case one that's lower, but I also have the OPTION of A) buying new bonds at a more favorable interest rate and/or B) buying stocks when prices fall. And, I suppose, C) buying anything else I feel like buying, like a boat.

That optionality has a lot of value. IMO, it's value is MUCH greater than some small amount of interest between 2.x% and 1.x.% If one has no need for liquidity or optionality and/or one has no interest or need to preserve capital, then pre-pay away!
Triple digit golfer
Posts: 10433
Joined: Mon May 18, 2009 5:57 pm

Re: should I pay off my mortgage early?

Post by Triple digit golfer »

Admiral wrote: Mon Sep 13, 2021 4:08 pm
harikaried wrote: Mon Sep 13, 2021 3:40 pm
hornet96 wrote: Mon Sep 13, 2021 2:49 pmmantra of "look at the portfolio as a whole, not its individual components" evaporate right before our eyes, when these mortgage prepayment threads come up
If someone asked, "I have $100k equities and $0 bonds -- can I just pretend that's actually an 80/20 asset allocation?" The obvious answer is no because equities don't act like bonds. Mortgage with interest payments are similar in various aspects to bonds with yield payments.

For example, if you have a 30-year conforming loan from a big or small bank sold to Fannie Mae or Freddie Mac, your mortgage interest payments might actually be yielding some of Total Bond Market BND where if you look at the holdings, Federal National Mortgage Assn. 2% coupon is 2.65% weight and Federal Home Loan Mortgage Corp. 3.5% coupon is 0.50% weight (in addition to a lot of other holdings). That's quite the indirect / inefficient way to send yourself money.
The argument you are making does not appear to be one that most people disagree with: Yes, if your mortgage rate is higher than your bond yield, on some level you are lending out more than you are taking in.

The point you are missing is not that bonds are a wonderful, high-yielding investment that everyone should buy rather than pre-pay their mortgage. It's that holding bonds is a way to preserve capital that ALSO provides optionality. Mortgages have two primary features: the rate is fixed, and the money put into them is illiquid, unless one is willing to pay interest to get it, or sell the house.

If I pay $1500 extra per month toward my mortgage, I get a guaranteed, fixed rate of return, and no access to my funds. If I invest that same $1500, I also get a guaranteed return, in this case one that's lower, but I also have the OPTION of A) buying new bonds at a more favorable interest rate and/or B) buying stocks when prices fall. And, I suppose, C) buying anything else I feel like buying, like a boat.

That optionality has a lot of value. IMO, it's value is MUCH greater than some small amount of interest between 2.x% and 1.x.% If one has no need for liquidity or optionality and/or one has no interest or need to preserve capital, then pre-pay away!
Great post.

People often act as if it's just a comparison of the mortgage rate vs. the yield on the bond or bond fund. It's much more than that. It's liquidity, optionality, and the all too recently overlooked and underrated risk tolerance. I believe that most people who say to hold 100% stocks until the mortgage is paid off probably have never truly experienced a bear market combined with the fear or actual realization of losing their jobs while trying to support a family. They're living in the world where the crash was recouped in just a few months and the stock market hit all time highs within a year, and now in a calendar year that hasn't even had a 5% pullback.

I will always hold bonds or cash. I would never, ever go through life and willingly make the choice to hold all of my assets in equities and real estate equity. I would never, ever willingly make the choice to have no cash or relatively safe fixed income investments. In bear markets, this seems to be a commonly held belief. In bull markets, it seems to all go out the window.

There is a price to pay for a sleep well at night portfolio. It's often those who are 100% TSM or 100% world equities who hold the opinion that any bonds while holding a mortgage is a stupid thing to do. Why aren't those investors 100% SCV or emerging markets? Higher risk, higher return.
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: should I pay off my mortgage early?

Post by harikaried »

Admiral wrote: Mon Sep 13, 2021 4:08 pmThe point you are missing is not that bonds are a wonderful, high-yielding investment that everyone should buy rather than pre-pay their mortgage. It's that holding bonds is a way to preserve capital that ALSO provides optionality
Yes I didn't mention the liquidity benefits in the specific post this was responding to, but I've already mentioned multiple times before that reply in just this topic that cash and bonds are still valuable and worth the opportunity cost. We're in this situation ourselves as we do have debt while explicitly choosing "inefficiently" to hold bonds and an emergency fund with a gross asset allocation around 15% bonds but a net asset allocation around 0% bonds.
Topic Author
Swennerb
Posts: 12
Joined: Thu Dec 27, 2018 8:17 pm

Re: should I pay off my mortgage early?

Post by Swennerb »

I know they say no one can predict the marker but…today I saw this opinion article on market watch:
https://on.mktw.net/2W7MOjF


“The even bigger reason why the indicator may have been so widely overlooked this week: Its message is hardly welcome. Its implicit forecast is that the stock market will be significantly lower in inflation-adjusted terms in a decade.”

Do Bogleheads look at these kinds of indicators?
Should articles like this change our mind in regards to my question?
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

Swennerb wrote: Fri Sep 24, 2021 2:40 pm I know they say no one can predict the marker but…today I saw this opinion article on market watch:
https://on.mktw.net/2W7MOjF


“The even bigger reason why the indicator may have been so widely overlooked this week: Its message is hardly welcome. Its implicit forecast is that the stock market will be significantly lower in inflation-adjusted terms in a decade.”

Do Bogleheads look at these kinds of indicators?
Should articles like this change our mind in regards to my question?
No. If they could predict the markets, why would they be working at MarketWatch?

Also your link is paywalled.
MDfan
Posts: 1116
Joined: Tue Oct 18, 2016 7:32 am

Re: should I pay off my mortgage early?

Post by MDfan »

I'd say no as well. I'm almost 60 owing, retiring,with about $275k on a mortgage at 2.625%. I'm not considering paying it early.
MP173
Posts: 2609
Joined: Fri Dec 07, 2007 5:03 pm

Re: should I pay off my mortgage early?

Post by MP173 »

Been in OP position, although not quite that low of mortgage rate.

Paid off two mortgages early. Never regretted it. I would allocate PFCF to both paying off mortgage and investing. Played both ends at a time in which considerable PFCF was available.

Personally I like the feeling of being debt free. BTW...have done this with auto loans also.

Ed
NextMil
Posts: 575
Joined: Wed Dec 13, 2017 11:33 am

Re: should I pay off my mortgage early?

Post by NextMil »

I have noticed a trend, when rates are low and the market is putting up good numbers, people always say never to pay it off. When its the opposite, people always say to pay it off early.

For me, I have come to the point where cash emergency fund and taxable brokerage account is high enough that I will start to plow more into mortgage reduction.

No one can predict the future. Build what you think is a prudent investor/debt policy statement and stick to it.
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

NextMil wrote: Fri Sep 24, 2021 4:56 pm I have noticed a trend, when rates are low and the market is putting up good numbers, people always say never to pay it off. When its the opposite, people always say to pay it off early.

For me, I have come to the point where cash emergency fund and taxable brokerage account is high enough that I will start to plow more into mortgage reduction.

No one can predict the future. Build what you think is a prudent investor/debt policy statement and stick to it.
Well naturally if the MORTGAGE rate is not low (which seems to be what you're saying) then paying off or down high-rate debt is more appealing and has a higher return. Stocks don't have to do very well to beat the majority of mortgages that most people currently hold. In fact, all they need to do is beat inflation.

If rates go up, then I'd still hold my low rate mortgage, but I'd also go back to buying bonds.
NextMil
Posts: 575
Joined: Wed Dec 13, 2017 11:33 am

Re: should I pay off my mortgage early?

Post by NextMil »

Admiral wrote: Sat Sep 25, 2021 6:28 am
NextMil wrote: Fri Sep 24, 2021 4:56 pm I have noticed a trend, when rates are low and the market is putting up good numbers, people always say never to pay it off. When its the opposite, people always say to pay it off early.

For me, I have come to the point where cash emergency fund and taxable brokerage account is high enough that I will start to plow more into mortgage reduction.

No one can predict the future. Build what you think is a prudent investor/debt policy statement and stick to it.
Well naturally if the MORTGAGE rate is not low (which seems to be what you're saying) then paying off or down high-rate debt is more appealing and has a higher return. Stocks don't have to do very well to beat the majority of mortgages that most people currently hold. In fact, all they need to do is beat inflation.

If rates go up, then I'd still hold my low rate mortgage, but I'd also go back to buying bonds.
When is the last year that bonds out performed your mortgage rate? For me it was 2018 for a hot minute, then prior to that 2008. Maybe bonds will slowly creep up, but not so sure about that. I didn't read the whole thread, but something that has made sense to me in the past is considering home equity as your bond side of equation. To me that's not entirely true, but its pretty close, and lately it would out perform bonds for sure.

If its close, I would reduce liability for sure. I know there are zealots on both side, and I used to be on the side of debt reduction, but I have come around to the middle ground because all or nothing doesn't reduce risk.
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

NextMil wrote: Sat Sep 25, 2021 7:23 am
Admiral wrote: Sat Sep 25, 2021 6:28 am
NextMil wrote: Fri Sep 24, 2021 4:56 pm I have noticed a trend, when rates are low and the market is putting up good numbers, people always say never to pay it off. When its the opposite, people always say to pay it off early.

For me, I have come to the point where cash emergency fund and taxable brokerage account is high enough that I will start to plow more into mortgage reduction.

No one can predict the future. Build what you think is a prudent investor/debt policy statement and stick to it.
Well naturally if the MORTGAGE rate is not low (which seems to be what you're saying) then paying off or down high-rate debt is more appealing and has a higher return. Stocks don't have to do very well to beat the majority of mortgages that most people currently hold. In fact, all they need to do is beat inflation.

If rates go up, then I'd still hold my low rate mortgage, but I'd also go back to buying bonds.
When is the last year that bonds out performed your mortgage rate? For me it was 2018 for a hot minute, then prior to that 2008. Maybe bonds will slowly creep up, but not so sure about that. I didn't read the whole thread, but something that has made sense to me in the past is considering home equity as your bond side of equation. To me that's not entirely true, but its pretty close, and lately it would out perform bonds for sure.

If its close, I would reduce liability for sure. I know there are zealots on both side, and I used to be on the side of debt reduction, but I have come around to the middle ground because all or nothing doesn't reduce risk.
I hold bonds for preservation of capital and ballast, not for their meager return. (Some of my fixed income is in TIAA TA which currently beats my mortgage rate and the return of TBM but I know that's not an investment that most have access to.)

I've had a 2.25% mortgage for five years. Yes, I have not bought TBM for a while, but that's mostly because I don't need much more in bonds when I retire than I have right now. 80% of my mortgage payment is principal anyway so I feel no need to get more equity at the moment.

I don't think it's inconceivable that yields move above 2% in the near future. But... I've been wrong before.
invest4
Posts: 1905
Joined: Wed Apr 24, 2019 2:19 am

Re: should I pay off my mortgage early?

Post by invest4 »

Admiral wrote: Mon Sep 13, 2021 4:08 pm The argument you are making does not appear to be one that most people disagree with: Yes, if your mortgage rate is higher than your bond yield, on some level you are lending out more than you are taking in.

The point you are missing is not that bonds are a wonderful, high-yielding investment that everyone should buy rather than pre-pay their mortgage. It's that holding bonds is a way to preserve capital that ALSO provides optionality. Mortgages have two primary features: the rate is fixed, and the money put into them is illiquid, unless one is willing to pay interest to get it, or sell the house.

If I pay $1500 extra per month toward my mortgage, I get a guaranteed, fixed rate of return, and no access to my funds. If I invest that same $1500, I also get a guaranteed return, in this case one that's lower, but I also have the OPTION of A) buying new bonds at a more favorable interest rate and/or B) buying stocks when prices fall. And, I suppose, C) buying anything else I feel like buying, like a boat.

That optionality has a lot of value. IMO, it's value is MUCH greater than some small amount of interest between 2.x% and 1.x.% If one has no need for liquidity or optionality and/or one has no interest or need to preserve capital, then pre-pay away!
This.

The mortgage vs bond yield argument is superficial to me. The options are indeed important...as well your own assessment and decision making on how you choose to exercise them to help achieve your financial goals. Of course, the conclusions will vary...and that's ok.
Monsterflockster
Posts: 980
Joined: Wed Nov 20, 2019 11:03 pm

Re: should I pay off my mortgage early?

Post by Monsterflockster »

Metsfan91 wrote: Wed Sep 08, 2021 8:17 pm No. You should not.
Well that depends. I like the security of a paid off house rather than money that I could lose half tomorrow.

I’d pay off in 6 years and heavily invest after those 6 years because it would make me sleep better. Some sleep better rolling the dice. Neither is right, neither is wrong.
User avatar
Metsfan91
Posts: 1019
Joined: Sat Jan 11, 2020 11:33 am
Location: Rust Belt

Re: should I pay off my mortgage early?

Post by Metsfan91 »

Monsterflockster wrote: Sat Sep 25, 2021 8:17 pm
Metsfan91 wrote: Wed Sep 08, 2021 8:17 pm No. You should not.
Well that depends. I like the security of a paid off house rather than money that I could lose half tomorrow.

I’d pay off in 6 years and heavily invest after those 6 years because it would make me sleep better. Some sleep better rolling the dice. Neither is right, neither is wrong.
House could lose value tomorrow. Houses lost 60/70% value merely a decade ago. Why pay off a house that could lose half or more of its value?

Yes, investment in stock market could lose half tomorrow. However, the question remains, "Is the market going to come back up? or remain at the bottom?" One ought not to gamble with money. One should invest in the market only if there is some confidence that market is going to go up and will produce gain on investment. If one lacks confidence, one ought not to invest in the market 6 years later (after paying off a house). Instead, should explore FDIC insured high yield savings accounts. Risk free investment. Great for sleeping better.
"Know what you own, and know why you own it." — Peter Lynch
Monsterflockster
Posts: 980
Joined: Wed Nov 20, 2019 11:03 pm

Re: should I pay off my mortgage early?

Post by Monsterflockster »

Metsfan91 wrote: Sun Sep 26, 2021 12:13 am
Monsterflockster wrote: Sat Sep 25, 2021 8:17 pm
Metsfan91 wrote: Wed Sep 08, 2021 8:17 pm No. You should not.
Well that depends. I like the security of a paid off house rather than money that I could lose half tomorrow.

I’d pay off in 6 years and heavily invest after those 6 years because it would make me sleep better. Some sleep better rolling the dice. Neither is right, neither is wrong.
House could lose value tomorrow. Houses lost 60/70% value merely a decade ago. Why pay off a house that could lose half or more of its value?

Yes, investment in stock market could lose half tomorrow. However, the question remains, "Is the market going to come back up? or remain at the bottom?" One ought not to gamble with money. One should invest in the market only if there is some confidence that market is going to go up and will produce gain on investment. If one lacks confidence, one ought not to invest in the market 6 years later (after paying off a house). Instead, should explore FDIC insured high yield savings accounts. Risk free investment. Great for sleeping better.
Why would I put money in the bank at 0.4% rather than pay down debt at 2.5%?

Perhaps I am probably the only one here who does not view my home as an investment. I have no intention of moving so if the housing market drops for my paid off house so be it.

Never going to convince anyone on these threads. Just pointing out people feel differently and that’s ok. Do what helps you sleep at night.
coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: should I pay off my mortgage early?

Post by coachd50 »

Metsfan91 wrote: Sun Sep 26, 2021 12:13 am
Monsterflockster wrote: Sat Sep 25, 2021 8:17 pm
Metsfan91 wrote: Wed Sep 08, 2021 8:17 pm No. You should not.
Well that depends. I like the security of a paid off house rather than money that I could lose half tomorrow.

I’d pay off in 6 years and heavily invest after those 6 years because it would make me sleep better. Some sleep better rolling the dice. Neither is right, neither is wrong.
House could lose value tomorrow. Houses lost 60/70% value merely a decade ago. Why pay off a house that could lose half or more of its value?

Yes, investment in stock market could lose half tomorrow. However, the question remains, "Is the market going to come back up? or remain at the bottom?" One ought not to gamble with money. One should invest in the market only if there is some confidence that market is going to go up and will produce gain on investment. If one lacks confidence, one ought not to invest in the market 6 years later (after paying off a house). Instead, should explore FDIC insured high yield savings accounts. Risk free investment. Great for sleeping better.
A house's Fair Market Value is irrelevant with regards to its ability to provide shelter to the inhabitants. Generally, when someone talks about "sleeping better" with regards to paying off a house, they are signaling that they do not view the house as an investment seeking returns like they view brokerage accounts or other investments and are not necessarily looking for the most optimized returns.
User avatar
grabiner
Advisory Board
Posts: 35307
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: should I pay off my mortgage early?

Post by grabiner »

Metsfan91 wrote: Sun Sep 26, 2021 12:13 am House could lose value tomorrow. Houses lost 60/70% value merely a decade ago. Why pay off a house that could lose half or more of its value?

Yes, investment in stock market could lose half tomorrow."
The difference between these two is that a house loses value whether it has a mortgage or not. Paying down the mortgage doesn't change the effect of a housing price decline (unless your current mortgage is large enough that you would be underwater, and you are willing to walk away). Thus selling bonds to pay down a mortgage doesn't change your risk level much, while selling bonds to buy stocks increases it.
Wiki David Grabiner
harikaried
Posts: 2613
Joined: Fri Mar 09, 2012 2:47 pm

Re: should I pay off my mortgage early?

Post by harikaried »

Monsterflockster wrote: Sun Sep 26, 2021 12:59 amWhy would I put money in the bank at 0.4% rather than pay down debt at 2.5%?
Sometimes it's worthwhile to pay the cost of keeping money in the bank instead of investing in equities or in this case "bonds." One probably shouldn't have an excessive amount just sitting in cash though especially when there's better guaranteed returns.
NextMil
Posts: 575
Joined: Wed Dec 13, 2017 11:33 am

Re: should I pay off my mortgage early?

Post by NextMil »

Metsfan91 wrote: Sun Sep 26, 2021 12:13 am
Monsterflockster wrote: Sat Sep 25, 2021 8:17 pm
Metsfan91 wrote: Wed Sep 08, 2021 8:17 pm No. You should not.
Well that depends. I like the security of a paid off house rather than money that I could lose half tomorrow.

I’d pay off in 6 years and heavily invest after those 6 years because it would make me sleep better. Some sleep better rolling the dice. Neither is right, neither is wrong.
House could lose value tomorrow. Houses lost 60/70% value merely a decade ago. Why pay off a house that could lose half or more of its value?

Yes, investment in stock market could lose half tomorrow. However, the question remains, "Is the market going to come back up? or remain at the bottom?" One ought not to gamble with money. One should invest in the market only if there is some confidence that market is going to go up and will produce gain on investment. If one lacks confidence, one ought not to invest in the market 6 years later (after paying off a house). Instead, should explore FDIC insured high yield savings accounts. Risk free investment. Great for sleeping better.
How much are those houses worth now? :wink:
Admiral
Posts: 5039
Joined: Mon Oct 27, 2014 12:35 pm

Re: should I pay off my mortgage early?

Post by Admiral »

The other thing to remember is that with very low interest rates (as they are now) and especially with 15 year mortgages (which become more affordable at low rates) a large part of your mortgage payment is already an investment: in your own pocket, as equity.

Now, you may not view your house as an "investment" (as that term is generally understood) but it is an asset. Every time you make a mortgage payment, the asset side of the balance sheet goes up, and it can be by quite a bit.

For example, let's look at a 15 year 250k mortgage. Let's assume you can get a 2.5% rate, which is quite doable today (many have lower).

Your payment is $1,666.97
$1,146.14 is principal
$520.83 is interest

That means from your first payment, you are putting 68% of your money back into your own pocket as forced savings. And naturally it goes up from there.

I'd argue that this is a tremendous deal to borrow a quarter of a million dollars, and most people would have no real need to put even more in. Just by paying on schedule, in 5 years more than half the interest will have been paid.
260chrisb
Posts: 1281
Joined: Wed Apr 28, 2010 7:26 pm

Re: should I pay off my mortgage early?

Post by 260chrisb »

Swennerb wrote: Wed Sep 08, 2021 8:06 pm I am 38 yo and have a desire to pay off my mortgage early but I’m not sure what is the best way. Here’s my details ;

Emergency fund: 20,000$ or about 6 mos
Retirement accnts are maxed out
Debt: only my mortgage which is currently at 288,000$
Bought my house at 330,000$ 2 years ago
It’s on a 15 year mortgage at 2.25%
Current monthly payment is $2,450/ month
I can make an extra payment of up to 1500$/month and the loan would be paid off in 6 years.
Tax Filing Status: single
Question:
-What options or ways are there to potentially apply this
extra 1500$/ month?
-Should I put it in a savings Accnt and then pay it off in a lump sum vs just making the extra payment every month?
- At this low interest rate, is it smarter to invest the money in say a stock like VTI every month instead and just leave it and not pay off my mortgage early? I know the investment option will be a higher return but I want to eliminate the risk of having my mortgage debt.
Thanks for looking.
This debate is never ending and while most will tell you not to based on the rate; I'd suggest some of both. You've established a good savings and investing history that will likely continue. I bought my house later in life and am nearly 6 years into a 15 year mortgage and nearing retirement. I won't get it paid off before I retire and fully understand and see the benefits of investing but at the same time there is just something about throwing extra money at the mortgage regardless of the rate. I'm guessing in 5-6 years you'll be okay having thrown an extra $750.00 a month at it as well as investing the same amount! Do both.
Post Reply