Pay off house or invest the $ ?

Brad Smith said:
Pay off the house. I'm able to retire in my 50's in comfort with no debt, partly because of paying off my house early in life. Parents were big believers in not carrying debt and it's worked out great for us. Pay off the house and invest the money that would have gone toward a mortgage. That would be a wise decision and you'll be much happier in the end.
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What if you had taken the extra cash and saved/invested safely and you could service the loan from that and/or dividends?
 
cowman said:
The nice thing about having the house paid off is you don't have to worry about it, and you always have the equity to take out a new loan if need be. The nice thing about investing it is you have a pile of money quickly available if you need it.
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Only if you have the income to service the loan.
 
GRG55 said:
Very few of us enjoy the prospect of secure employment, income and a pension for our lifetime.
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I thought I was very secure but it didn't out that way. It took almost eight years to get back to where I was.
 
Larry in TN said:
I don't think the OP said anything about depleting his cash?

If the $140,000 is all he has in cash then I'd say keep three to six months of living expenses in cash for an emergency fund then pay the rest on the mortgage. Same with other debt. The mortgage would be the last debt to pay off.
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We’d still have a decent buffer. Remember, we own a Soaring business so we have to have some reserve cash on hand. It wouldn’t be fun if we has the financial stress.
 
Put the extra 140k in a panel upgrade :)
You know you want to..

Seriously though, there are pros and cons to doing it both ways, and there are other options too.
You could take the investment profits and make extra payments on the house. Thus keeping the security of the kitty, while speeding up the payoff.

I elected to pay mine off and have never regretted it. Gave me some freedom, peace of mind, and a guaranteed return on my money in a worrisome market.
I've had investments that were AMAZING according to every research firm, investment firm, banking institution, friends, relatives and countrymen.
They still went belly up, and I got checks for .02, .25, $3.17 after the class action suit which retired the lawyers involved.

I have some rental property also, and chose to pay them off as well. The last thing I needed was for the market to go south, everyone get laid off again, so no renters are paying rent, and I couldn't cash out my investments to cover the loan payments without losing it all.

I have a retirement account with work, and if you have a fairly large one as well, then you probably have plenty of exposure to the stock market...and real estate helps diversify. At least those are my thoughts.

So far I sleep pretty good at night in regards to all that.

My damn kids on the other hand....
 
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deonb said:
But you still don't really own it, right? If you stop paying taxes on it it will be taken away from you. A lot of people over here have had to move out of their "paid-off" homes recently because the house values (and taxes) tripled in the last 10 years.

So all you're really doing is putting some money down to decrease (but not eliminate) your house payment.

With that in mind... do you think it is still a good investment at 3.5% ? That's up to you, but just don't think you're going to own something that can't be taken away from you.
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Sounds like a good argument to move back home and live in Mom's basement. ;) :D
 
Skyrys62 said:
They still went belly up, and I got checks for .02, .25, $3.17 after the class action suit which retired the lawyers involved.

....
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Oh you bought ValueJet and WorldCom too? o_O :D
 
saddletramp said:
We are in the lucky position to have enough extra cash in our savings account to pay off our house. Our investment guy thinks we should put the money in our retirement account & continue to make our house payments.

His logic is that our mortgage interest rate is 3.5% & we could earn over 9% + if we invested the money.

We happen to live in a hot real estate market & according to Zillow our house appreciated $4,800 in the last 30 days. So our house seems to be a great investment.

We have no other debt & my wife & I feel like having our house paid off would make us feel very secure. After the mortgage is paid off we'd have another $1,700 a month to invest. There is no risk in paying off the house. Investing ALWAYS involves some risk.

I'm 61 years old, enjoy a real good income, & don't plan to retire for another 9 years.

What would you do?
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What I would do....and you do are two different things. Do what makes you and the Mrs sleep well at night.

I took my extra money and bought a plane...so far it's been a fun investment. By the time I'll need the money....flying will be over and I'll just sell. :D
 
The obvious solution here is to go to Vegas and bet the 140k on black... :p
 
skier said:
A house tripling in value? Good luck with that one. Maybe if you bought in the 80s and sold in 2007, but I doubt we'll see that kind of growth again anytime soon.
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Depends on where you live. My house more than doubled in value just in the last 5 years - so did everybody's around me. It's at five times it's value since 25 years ago.

Most houses bought in 80's after the crash and sold in 2007 before the crash would have seen much more than triple in value. I'm not talking inflation-adjusted numbers, just nominal currency here. Keep in mind that in any 30 year period, the currency itself would devalue by about half to a 3rd.
 
Shawn said:
While the numbers may make sense to invest today...

If the stock market and/or economy crashes you could loose your whole savings and investments and still be stuck with a mortgage payment on the house.

If the real estate market crashes your paper net worth goes down but you still have a roof to live under that you own free and clear with a lower monthly cost of living with no mortgage.
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I look at this differently. If the housing market crashes, you still own a house, at whatever value it has. If the market crashes, you still own pieces of companies that have value - assets, employees, brands, products, etc. Those assets don't go away, despite however the market may value them. So when the market comes back (on the house or the equities), so does your value.
 
Here's a question for the board?

Why do the rich get richer and the poor get poorer? Which choice would the future rich person make and which choice would the perennial poor person make?

I'm not saying that this one decision will be the deciding factor, but the decision making criteria and rationale is what separates the rich from the poor.

I still think my suggestion, which no one has commented on, is a good one. Pay off half the mortgage, and invest the rest. Problem is, I know people that came into some money and tried this. They paid off half their mortgage, then wasted the rest. But again, that is the kind of choice that will determine your future financial well being.
 
Checkout_my_Six said:
the rich are always looking to multiply cash.....not enjoy it or stuff a mattress.
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While that only tangentially address my question, or this thread, it is nevertheless very true and could send me into a whole nuther conversation. But I don't want to get this thread closed, or get myself banned so I will refrain.
 
JOhnH said:
Here's a question for the board?

Why do the rich get richer and the poor get poorer? Which choice would the future rich person make and which choice would the perennial poor person make?

I'm not saying that this one decision will be the deciding factor, but the decision making criteria and rationale is what separates the rich from the poor.

I still think my suggestion, which no one has commented on, is a good one. Pay off half the mortgage, and invest the rest. Problem is, I know people that came into some money and tried this. They paid off half their mortgage, then wasted the rest. But again, that is the kind of choice that will determine your future financial well being.
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They use leverage effectively.
 
kyleb said:
If the market crashes, you still own pieces of companies that have value - assets, employees, brands, products, etc. Those assets don't go away, despite however the market may value them. So when the market comes back (on the house or the equities), so does your value.
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Yeah, that's what I though about GM and Fleetwood. Buh bye money. :mad:

wsuffa said:
They use leverage effectively.
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Ditto... any time I can borrow money for less than 5% I'm on it like stink on s**t.
 
wsuffa said:
They use leverage effectively.
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They also have investment opportunities and timeframes which won't work for many of us. In, say, 2010, you could buy undeveloped land in the Atlanta area for 1/3 of what it would bring today. The rich have the money to buy the land and the time horizon to hold until the investment pays off. Most of us don't have the money, much less the ability to park it for a <potentially> undetermined amount of time.
 
I can't help but think in reading some of these posts that a lot of folks must have been asleep during the S&L crisis, or the meltdown of 2008. If you think things are more secure now, you are kidding yourselves. Paper wealth evaporates, and stockholders are the first ones overboard. There is a new crisis coming, we just don't know what it'll look like, or when it will hit. That's just the nature of capitalism.
Invest like a pilot... always look for a safe spot to put down should the motor quit.
 
Pay off the house,it will continue to appreciate in value. Talk to a reputable advisor and invest ,what the mortgage payment would have been.
 
JOhnH said:
Here's a question for the board?

Why do the rich get richer and the poor get poorer? Which choice would the future rich person make and which choice would the perennial poor person make?

I'm not saying that this one decision will be the deciding factor, but the decision making criteria and rationale is what separates the rich from the poor.

I still think my suggestion, which no one has commented on, is a good one. Pay off half the mortgage, and invest the rest. Problem is, I know people that came into some money and tried this. They paid off half their mortgage, then wasted the rest. But again, that is the kind of choice that will determine your future financial well being.
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I reject the premise of your first question, but I do like where you ended up going and fundamentally agree with you. I would have led with "Why do people who have it made **** away their opportunities and treasure doing stupid things?" And that was not directed at the OP or anyone else here in particular.

I pretty much ended up where you did when I thought about it, but didn't comment. Another tactic would be to make extra payments, ending the loan earlier. There really isn't enough info here to give him a good answer though. But it is nice to not have a note on your house.
 
JOhnH said:
Why do the rich get richer and the poor get poorer? Which choice would the future rich person make and which choice would the perennial poor person make?
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I’ve thought about that a lot.

I think education is a big part of it, with too little emphasis on investment.

I just imagine every dollar mostly poorer people spend on lotto and scratch off tickets instead being squirreled away a few dollars at a time into a growth or income mutual fund. I don’t think that option is ever weighed. I wonder if many poor people would even know what a mutual fund was or how to get started.

Which is a shame.
 
I haven't seen it mentioned, so I will add this - in a few years you will probably want to retire if you haven't already. Pay off your house in the next few years and you can enter retirement with no mortgage.

You can do a lot of flying on $1700 a month.
 
JOhnH said:
Here's a question for the board?

Why do the rich get richer and the poor get poorer? Which choice would the future rich person make and which choice would the perennial poor person make?
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There’s a saying about asset rich and cash poor...

Until rich or poor is defined, the question is irrelevant.

However, my interactions with those that have a net worth of >$1M indicate they are entirely debt free, have >high school education, have fully funded IRAs and other qualified retirement plans for >10 years, and have an annual income of <$135,000.

Most of them, about 1/3 of their net worth is in debt-free real estate, about 1/2 in investment portfolios, and about 1/6th is income.

YMMV.
 
“Value” has an aspect not considered in the financial ledger. Whether the bank says your house is worth $100k or $1M a decade from now, the house will have the same value in providing you shelter and comfort. The “bank value” just determines what your taxes will be until you sell.

If you plan to stay in the house in your retirement years, pay off the mortgage and don’t worry about how it may appreciate or depreciate. At your age, you don’t have a guarantee that you will be able to keep working. Get rid of your debt.
 
The appreciation, or lack thereof, of the house is irrelevant. If you own the house, you experience the appreciation regardless of any mortgage that you may, or may not, have on it. It may enter into the decision on whether or not to buy a house, or how big of a house to buy, but it has nothing to do with the question of how quickly to pay off the mortgage.
 
Norman said:
Want stability? I believe Warren Buffet has the answer. He may not be perfect but his track record is hard to refute.
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No doubt. But you do understand that he has taken a temporary beating just like the rest of the market. If you bought a share of BRK in 2007 you were stuck with it until the price recovered in 2012. That doesn't take anything away from Mr Buffets skill as investor, the need to ride out a temporary downturn applies to him just like the rest of us. Of course I wish I would have bought a share when they were at a mere 100k....

BRK.jpg
 
cowman said:
The nice thing about having the house paid off is you don't have to worry about it, and you always have the equity to take out a new loan if need be. The nice thing about investing it is you have a pile of money quickly available if you need it.
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I would not rely on a bank giving you money when you actually need it. As Wsuffa suggested above, its a good idea to get a heloc on a paid off house. While a bank could pull a heloc if they become aware of adverse information (like a job loss or illness), they dont have reason to even look at this information unless you tell them. But if you are out of a job and now try to look for a heloc, you'll have an uphill struggle.
 
House schmouse...

get one of these
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or better yet

images


orrrrrrrrrrrr

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