[IwannabeaCPA2017]

Hey,
so I’m really confused with what to do so I’m turning to A71 community to get some insight. I have recently inherited a small amount of money. My question is, should I pay off my mortgage? Im still very young, 26 years old. I was debating if this is a smart move or should I just take that money and put it in stock market. My philosophy is if I pay off my mortgage I then dont have to worry about making a huge mortgage payment in the event I lose my job or if the economy goes south. Im a little ambivalent of how the stock market will perform, so I’m just curious what others’ opinions are? Those with much more experience could offer some insight?

Thanks!

[MommyCPA]

PAY OFF YOUR MORTGAGE! Have you ever heard of Dave Ramsey? I'd look him up and download his podcast…or maybe even call into his show and give him your exact scenario!

[Anonymous]

I'm echoing EXACTLY what @MommyCPA just said. As I was reading your post, I was thinking I would pay that mortgage off in a heartbeat…this young person needs to listen to Dave Ramsey on YouTube.

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[IwannabeaCPA2017]

Thanks guys! I have heard of Dave Ramsey before but sometimes I just dont agree with his thinking. I recalled listening to one segment and I thought he was against the notion of paying off mortgage early? Perhaps, I should listen to his show again. Thanks again, will check Ramsey's show.

[ohiocpacma]

I could go either way on this… it's up to you and your comfort in risk.

1) Pay down your mortgage – You still have a mortgage payment, but you've accelerated the payoff date.
2) Pay off your mortgage -Yay, no mortgage. And, now that amount which was allocated to monthly payments could be invested.
3) Put your money in investments.

I think it's up to you. If you choose investments, you will hopefully make a higher return than the interest rate on your mortgage and you could still be liquid if you need the money (but if the economy goes south, so will your investment most likely). But, paying a mortgage used to be a taxable advantage (deduction for mortgage interest). Now not so much since the standard deduction increased. Also, you have to think of the long term impact of interest rates rising. If you got your mortgage a few years ago, interest rates were low (~4%). You may want to lock yourself in to that lower rate and take advantage of higher returns in equities or other bond instruments.

Also, I'm not a Dave Ramsey evangelist, but I think it's great that he is reaching so many people to rethink their financial strategies. But blindly paying off your debt without considering all the impacts is not something that I would endorse.

[Asking for a Friend]

would suggest it depends on your interest rate, other savings, income, and mortgage amount. If 4% or less IR, then I'd debate keeping it aside and investing it in some low cost ETFs and other investments. Or debate splitting hairs and paying off portion and keeping portion for savings/investment. Congrats

[Recked]

Run the numbers if you have an amortization program, or table.
I had calculated that by holding on to my mortgage for the full term the interest was going to cost me roughly the same as the purchase price on the house.
It's been a while for me but my house was about 120k and the interest was about 3.75% perhaps.
By dropping 20,400 the day after closing I was able to eliminate the PMI which saved me 100-120/month and also cut 8-10 years off the back end of my mortgage, and saved me about 40k in interest over the life of the mortgage.

I ended up “borrowing” money from myself to pay down the note, and then repaid the balance to savings by the 8 year mark.
Do you own your things or do your things own you. There is a certain sense of security in knowing you just need to cover RE taxes, insurance, and utilities.
Just be smart and keep banking that mortgage nut every month, instead of turning around and spending it. Accelerate your savings, accelerate your financial freedom, accelerate your retirement.
Hindsight, yes I could have earned far more by investing that same money into the market, but with the market at all time highs, who really knows where it will go. Its all a house of cards anyway. If the market tanks, the housing market will probably end up in the gutter too.

[jeff]

A couple of things …

1) This isn't financial advice … just general info – I don't know anything about your finances.

2) I've spent a week at Dave Ramsey's HQ and am trained as a financial counselor – which I do pro bono for couples in need

3) I teach Dave Ramsey's class at church

So … I'm indoctrinated in the world of Dave Ramsey 🙂

Follow his baby steps… they are on his website.

The money would knock out things in this order …

$1,000 emergency fund
Pay off all non-mortgage debt (student loans, car loan etc)
You have 3-6 months of expenses in the bank (your big emergency fund)
You're saving 15% of your income towards retirement
Saving for kid(s) college (if applicable)
Pay off your mortgage

Ask yourself this:

“If I had a paid-for house … would I take out a mortgage on it and invest it?”

Most people would answer “no” to this … because risk is measured with your heart.

Just some thoughts – go to daveramsey.com … check it out.

Again – not financial advice … just general info giving guidance on what Dave teaches.

jeff

[TommyTheCat]

Jeff brings up a good point on the risk front that I'd like to echo. The stock market is at historical highs. The market is overdue for a correction, and possibly a large one at that in the next year or two.

Ask yourself this…pretend you go the route of investing the funds in stock market rather than paying down the mortgage. The market is down 30% by this time next year. How would you feel in that scenario? Also bear in mind that property values tend to trend with the stock market and vice virsa. So this time next year the home value is down say 15% and the stock market down 30%. You'll have less equity in the home to borrow against in case an emergency situation arises.

I tend to focus on the worst case what ifs when doing financial planning rather than the loft what ifs. Good luck to you with either route you choose.

[Anonymous]

Agree 100% with what Jeff said. If you could put it in a CD earning 14% (yes I actually remember that), that’d be one thing. The stock market is not only risky, it’s a distraction. Noone ever lost sleep worrying that their mortgage is paid off.

[animalwithin]

Pay off the mortgage. Stock market is at an all time high, consumer sentiment is at a high, and we're due for a recession, not the best place to put your money in at this moment. Get rid of debt (or reduce it significantly).

[IwannabeaCPA2017]

I guess I should say the money was actually in an IRA account already being invested- didn't realize this until I posted. But thanks for all the input

[Author]

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