Different Spin on the question of "Should I pay of the house or Invest.."

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
oleblue
Posts: 142
Joined: Tue Oct 06, 2009 1:37 pm

Different Spin on the question of "Should I pay of the house or Invest.."

Post by oleblue » Sun Apr 19, 2020 12:45 am

Many of these discussions assume investing vs paying off the house over a long period of time, 10 to 30 years. The math will almost always say it's better financially over that long of a term to invest. However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.

Lets assume a person was 37 years old, has been investing for years and has "enough" money in investments and emergency funds for their particular situation. Today, they have a $150K balance on a 15 yr, 3% mortgage, and are planning to ER in exactly 2 years with a decent pension/medical for the rest of their life. During these last two years of work, that person has $6K a month to either invest, or pay off the house over that time and be debt free when going in to ER.

Keep in mind after ER at age 39, the $1,700 mo that would have been the house payment, will now be free'd up for extra cash flow and invested for the next 15 years or longer.

I think I would pay off my house the next two years and be debt free at ER, based off this situation. I would be really interested to see this math 15 years from now when you're only talking about a two year "not investing" but paying down the house scenario vs.15 or 30 years. Thoughts?

User avatar
celia
Posts: 10843
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by celia » Sun Apr 19, 2020 12:52 am

Part of it depends where the house is located and how much it appreciates each year compared to stocks. (Think California, for example.)

Topic Author
oleblue
Posts: 142
Joined: Tue Oct 06, 2009 1:37 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by oleblue » Sun Apr 19, 2020 1:39 am

celia wrote:
Sun Apr 19, 2020 12:52 am
Part of it depends where the house is located and how much it appreciates each year compared to stocks. (Think California, for example.)
The house is in Arkansas.

Swivelguy
Posts: 406
Joined: Sun Jan 18, 2009 11:37 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Swivelguy » Sun Apr 19, 2020 1:43 am

celia wrote:
Sun Apr 19, 2020 12:52 am
Part of it depends where the house is located and how much it appreciates each year compared to stocks. (Think California, for example.)
Does it, though? The exposure to the housing market is the same regardless of whether a mortgage is carried or not. The tradeoff is between having a mortgage and investments, or having neither.

Topic Author
oleblue
Posts: 142
Joined: Tue Oct 06, 2009 1:37 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by oleblue » Sun Apr 19, 2020 8:06 am

So I was doing some math and let me say upfront that math was never my strong suit.

Please correct me if I am wrong here with this math.
This first example is assuming starting with 0 investable assets.
So it would be $1700 for 13 years at 7% which would be $424K, $43K more and less risk than if I invested $6,000 a month for two years and let it sit for 13 while paying off the house which would end up being $381K at the end of 13 years.

On this example, let's say there is $500K invested already.
Starting with $500K and adding $6K a month for 2 years and then stopping, then letting that amount sit for 13 years would end up with $1.75M.
Starting with $500K and paying off the house the next 2 yrs with that $6K a month, then investing $1700 for the next 13 years would end up with $1.8M.

What did I miss here? Seems to me even the numbers say to pay off the house the next two years. Not to mention the peace of mind, less risk and cash flow if I need it. (I can skip an investment contribution, but not a house payment)

User avatar
bertilak
Posts: 7526
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by bertilak » Sun Apr 19, 2020 8:25 am

You always need to take risk into account. Investing carries risk. Paying off a mortgage is risk free.

This comes into play in retirement planning. One cannot afford to take nearly as much risk during retirement, assuming one is less able to generate new income during retirement. Proper planning includes setting up a risk-free income (aka positive cash flow) to cover some level of expenses. You get to decide what that level is, but it better be something. For most people social security is less than the desired risk-free level. Some people see SS itself as risky (not I).

The trade-off between paying off a mortgage and investing depends a lot on how you are establishing your risk-free income. That is generally more important than the exact math on how much return you expect from investing.

There are two (at least!) ways to look at risk:
  • Academically: VTSAX is just as risky no matter how much you hold.
  • Personally: There is some minimum level of performance from VTSAX and if you only rely on that minimum level it is, for you, essentially risk free. This may even be an acceptable loss.
Last edited by bertilak on Sun Apr 19, 2020 8:34 am, edited 1 time in total.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

Leesbro63
Posts: 6590
Joined: Mon Nov 08, 2010 4:36 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Leesbro63 » Sun Apr 19, 2020 8:32 am

About 6 months ago I had a similar discussion with a young family member who was in a similar situation. Despite the math suggesting the house should be refinanced to the max and the money put into equities, I advised and they complied to pay off the mortgage. Fast forward to now and they are very glad to have a debt-free home, even though employment APPEARS to be stable at this time. There's an intangible, particularly during unexpected hard times, to owning the ranch free and clear.

User avatar
bertilak
Posts: 7526
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by bertilak » Sun Apr 19, 2020 8:40 am

Leesbro63 wrote:
Sun Apr 19, 2020 8:32 am
About 6 months ago I had a similar discussion with a young family member who was in a similar situation. Despite the math suggesting the house should be refinanced to the max and the money put into equities, I advised and they complied to pay off the mortgage. Fast forward to now and they are very glad to have a debt-free home, even though employment APPEARS to be stable at this time. There's an intangible, particularly during unexpected hard times, to owning the ranch free and clear.
I would go a step further and not say being debt-free is "intangible" but look at it the other way around: investing, especially with borrowed money, is both tangible and uncertain.

If by "intangible" you mean "sleep well at night" I can agree with that.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

User avatar
Watty
Posts: 19771
Joined: Wed Oct 10, 2007 3:55 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Watty » Sun Apr 19, 2020 8:44 am

oleblue wrote:
Sun Apr 19, 2020 12:45 am
I would be really interested to see this math 15 years from now when you're only talking about a two year "not investing" but paying down the house scenario vs.15 or 30 years. Thoughts?
With a short time frame you have a lot more sequence of risk so to me that would make paying off the mortgage a lot more favorable. Here is a very simplistic example of sequence of returns risk that I have posted before.
If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also pay a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To pay off the mortgage at the end of the second year you would need about $96.5K so you would need to gain back $12.5K and another $6,000 for the next years mortgage payments which combined is $18.5K. That would take a 22% return on the remaining $84K to get back to the point where you could pay off the mortgage.

In the past portfolios have declined in roughly one of four or five years depending on the asset allocation. (20 to 25 percent of the time)

https://personal.vanguard.com/us/insigh ... llocations

The sequence of returns risk can also go the other way and you could get lucky and have the first couple of years get good returns that would put you on the path for large gains over the years. There will sometimes be very optimistic projections on just how much better not paying off the mortgage could be but one limiting factor that needs to be considered is that few people actually keep a 30 year mortgage for the full 30 years. It is difficult to put a number on it but many people who own a home will sell it in less than 10 years.

User avatar
Sandtrap
Posts: 11041
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Sandtrap » Sun Apr 19, 2020 8:55 am

Pay off the home and other debts.
ER debt free = less stress for you (everyone’s different)
Unless you are planning to sell the home in less than 3-5 years.

You seem inclined to enter retirement debt free.
And, have the means to do so.
Simple is better?

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know

prairieman
Posts: 260
Joined: Thu Mar 01, 2018 3:17 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by prairieman » Sun Apr 19, 2020 9:09 am

I always looked at paying off the house as a way to survive almost anything. Once the mortgage was paid off, we could live off almost nothing if we needed to, for example, if we lost our jobs. We never had to live off nothing, but slept well through the dot com bubble and housing crisis and never had to worry about being forced onto the street when we went through a couple of health crises.

User avatar
grabiner
Advisory Board
Posts: 27202
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by grabiner » Sun Apr 19, 2020 9:59 am

oleblue wrote:
Sun Apr 19, 2020 8:06 am
So I was doing some math and let me say upfront that math was never my strong suit.

Please correct me if I am wrong here with this math.
This first example is assuming starting with 0 investable assets.
So it would be $1700 for 13 years at 7% which would be $424K, $43K more and less risk than if I invested $6,000 a month for two years and let it sit for 13 while paying off the house which would end up being $381K at the end of 13 years.

On this example, let's say there is $500K invested already.
Starting with $500K and adding $6K a month for 2 years and then stopping, then letting that amount sit for 13 years would end up with $1.75M.
Starting with $500K and paying off the house the next 2 yrs with that $6K a month, then investing $1700 for the next 13 years would end up with $1.8M.

What did I miss here? Seems to me even the numbers say to pay off the house the next two years. Not to mention the peace of mind, less risk and cash flow if I need it. (I can skip an investment contribution, but not a house payment)
The math doesn't check. If your investment return is equal to the mortgage rate, you break even whether you pay off the mortgage or invest. If you pay an extra $10,000 on your 3% mortgage, your net worth will be $10,300 higher next year. If you invest that $10,000 in something which happens to return 3% in the next year, your net worth will also be $10,300 higher.

The reason to pay off the mortgage, or not to pay it off, is the trade-off between return and risk. If you have a low-risk bond portfolio, you can keep that portfolio and use it to make the mortgage payments, or sell the portfolio now to pay off the mortgage, taking about the same amount of risk. Keeping the mortgage in this situation does not increase your risk of losing the house, since you have a dedicated source of funds which can be used to make the mortgage payment. Therefore, in this situation, the fair comparison is between bond yields and mortgage rates. If they are close, keeping the mortgage is a better deal, because you retain the option to refinance or pay off the mortgage later.

And since low-risk bonds are earning much less than 3% now, I would pay off the mortgage unless it is deductible in a high tax bracket. (The current yield on Admiral shares of Vanguard Long-Term Tax-Exempt is 2.56%, but that has increased in the last month because there is significantly more credit risk. It might still be worth holding those bonds and a mortgage at 2% after tax.)
Wiki David Grabiner

konic
Posts: 36
Joined: Fri Jan 05, 2018 5:26 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by konic » Sun Apr 19, 2020 10:12 am

I think this issue is complicated and hence can only have a personalized solution. Unique to each investor’s situation.

Have you also considered the impact of lowering cash flow requirement in ER in the ACA plans you might get? By paying of mortgage, you will lower the amount of taxable income required in ER. This give one a greater ability to manage the ACA subsidy cliff. Th impact of that cliff can be quite high for some.

Small Savanna
Posts: 260
Joined: Sat Feb 09, 2019 2:27 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Small Savanna » Sun Apr 19, 2020 10:24 am

One consideration is taxes - under the old tax law, most mortgage interest was tax deductible. Under the new law a lot of mortgage interest isn't tax deductible. For example, if you have $10K in state and local taxes, $2K in charitable, and $10K in mortgage interest for a married couple, you're still better off taking the standard deduction, in which case your mortgage interest provides no tax benefit. On the other hand, interest income is fully taxable, either now or later, unless it is in a Roth account.

So let's say that your mortgage interest rate is 3.5% and you are able to get a 3.5% return on a low-risk investment (good luck finding that). If you've maxed out all of your Roth headroom, and you can only invest the money in a taxable account then you would be better off to pay down the mortgage.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by HEDGEFUNDIE » Sun Apr 19, 2020 10:26 am

Small Savanna wrote:
Sun Apr 19, 2020 10:24 am

So let's say that your mortgage interest rate is 3.5% and you are able to get a 3.5% return on a low-risk investment (good luck finding that).
EE bonds

Small Savanna
Posts: 260
Joined: Sat Feb 09, 2019 2:27 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Small Savanna » Sun Apr 19, 2020 10:37 am

HEDGEFUNDIE wrote:
Sun Apr 19, 2020 10:26 am
Small Savanna wrote:
Sun Apr 19, 2020 10:24 am

So let's say that your mortgage interest rate is 3.5% and you are able to get a 3.5% return on a low-risk investment (good luck finding that).
EE bonds
That's a good point, although you have to hold to maturity to get that.

HEDGEFUNDIE
Posts: 4801
Joined: Sun Oct 22, 2017 2:06 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by HEDGEFUNDIE » Sun Apr 19, 2020 10:42 am

Small Savanna wrote:
Sun Apr 19, 2020 10:37 am
HEDGEFUNDIE wrote:
Sun Apr 19, 2020 10:26 am
Small Savanna wrote:
Sun Apr 19, 2020 10:24 am

So let's say that your mortgage interest rate is 3.5% and you are able to get a 3.5% return on a low-risk investment (good luck finding that).
EE bonds
That's a good point, although you have to hold to maturity to get that.
Good thing mortgages are 30 years.

User avatar
rocket354
Posts: 363
Joined: Mon Dec 14, 2015 12:31 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by rocket354 » Sun Apr 19, 2020 11:15 am

For any "Mortgage vs Invest" question, the term of the mortgage usually does not much matter in terms of calculating which one leaves you with more money at the end. The only thing that matters is your assumption about what the return will be from investing. If your post-tax-considerations mortgage is 3.5% and you think your investments will return a post-tax amount > 3.5% then you will be better off investing. The term of the mortgage, whether it is 1 month or 40 years, does not matter. All the term does is increase the magnitude of the resulting difference: all else being equal, taking the smaller expected return for 1 month is significantly less damaging to one's bottom line than taking the smaller expected return for 40 years.

Now, the caveat is that depending on the investment you might conclude that a two-year window in your investment is riskier than a thirty-year window. So risk-adjusted, you could prefer to pay off your mortgage with two years remaining than you would if you had 30. But then, the opposite could be true, as well.

I think the best approach is to do whichever you feel most comfortable with as long as the difference isn't much. I just paid off 2.125% student loans less than a year ago because both the amount and term were so small that even if I were "wrong" it wasn't going to cost me a whole lot in absolute terms, and was a guaranteed return. And paying them felt damn good.

User avatar
grabiner
Advisory Board
Posts: 27202
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by grabiner » Sun Apr 19, 2020 11:40 am

rocket354 wrote:
Sun Apr 19, 2020 11:15 am
For any "Mortgage vs Invest" question, the term of the mortgage usually does not much matter in terms of calculating which one leaves you with more money at the end. The only thing that matters is your assumption about what the return will be from investing. If your post-tax-considerations mortgage is 3.5% and you think your investments will return a post-tax amount > 3.5% then you will be better off investing. The term of the mortgage, whether it is 1 month or 40 years, does not matter. All the term does is increase the magnitude of the resulting difference: all else being equal, taking the smaller expected return for 1 month is significantly less damaging to one's bottom line than taking the smaller expected return for 40 years.
The term of the mortgage matters in the comparison at the same risk level. If five-year bonds yield 2% and ten-year bonds yield 3%, then you come out ahead at no additional risk by selling a five-year bond to make an extra payment on a five-year 2.5% loan, while you come out behind by selling a ten-year bond to make an extra payment on a ten-year 2.5% loan. (You can sell a five-year bond to make an extra payment on a ten-year loan, and make an expected profit, but you are then increasing the risk, as you will lock in five more years of 2.5% returns which may or may not be above the low-risk rate five years from now.)
Wiki David Grabiner

moneylove
Posts: 4
Joined: Sun Apr 19, 2020 11:30 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by moneylove » Sun Apr 19, 2020 2:47 pm

Nobody mentioned this: In my case, 45 years ago, before I got married, I bought a cheap house in a red-lined neighborhood which the realtor said was improving. I paid the mortgage off as the neighborhood improved but then, my hubby needed money to open a business so I again took a small mortgage. I paid that mortgage off too. Then, my son wanted a business and mortgages were 3.9% so I got small one. I declined being part owner for both businesses. There are so many variables but it’s good to have your house work for you. Next, my kids will someday inherit the house on a stepped up basis.

Topic Author
oleblue
Posts: 142
Joined: Tue Oct 06, 2009 1:37 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by oleblue » Sun Apr 19, 2020 10:39 pm

Sandtrap wrote:
Sun Apr 19, 2020 8:55 am
Pay off the home and other debts.
ER debt free = less stress for you (everyone’s different)
Unless you are planning to sell the home in less than 3-5 years.

You seem inclined to enter retirement debt free.
And, have the means to do so.
Simple is better?

j🌺

Yes, my thoughts exactly. I like to keep it simple and don't mind sacraficing a few bucks in the end to get piece of mind now. I'm definitely leaning towards paying off the house and being debt free when I push the ER button. I'm not planning to sell anytime soon if ever, I love the place.
grabiner wrote:
Sun Apr 19, 2020 9:59 am


The math doesn't check. If your investment return is equal to the mortgage rate, you break even whether you pay off the mortgage or invest. If you pay an extra $10,000 on your 3% mortgage, your net worth will be $10,300 higher next year. If you invest that $10,000 in something which happens to return 3% in the next year, your net worth will also be $10,300 higher.

The reason to pay off the mortgage, or not to pay it off, is the trade-off between return and risk. If you have a low-risk bond portfolio, you can keep that portfolio and use it to make the mortgage payments, or sell the portfolio now to pay off the mortgage, taking about the same amount of risk. Keeping the mortgage in this situation does not increase your risk of losing the house, since you have a dedicated source of funds which can be used to make the mortgage payment. Therefore, in this situation, the fair comparison is between bond yields and mortgage rates. If they are close, keeping the mortgage is a better deal, because you retain the option to refinance or pay off the mortgage later.

And since low-risk bonds are earning much less than 3% now, I would pay off the mortgage unless it is deductible in a high tax bracket. (The current yield on Admiral shares of Vanguard Long-Term Tax-Exempt is 2.56%, but that has increased in the last month because there is significantly more credit risk. It might still be worth holding those bonds and a mortgage at 2% after tax.)
I did leave out the mortgage 3% all together and took only the investment returns in account with an optimistic 7% for the market. Counting the mortgage, this is the way I was thinking about it, please correct me if I'm missing something. It doesn't seem to change much.

Starting with $500K and adding $6K a month for the next 2 years invested at an optimistic 7% and then stopping, then letting that amount sit for 13 years at that same 7% would end up with $1.75M. I would be making a guaranteed 3% return on the $1700 a month I would be paying the mortage with for those 13 years in this example.

Starting with $500K and paying off the house the next 2 yrs with that $6K a month would earn me a guaranteed rate of 3% on that $6K a month, then investing $1700 for the next 13 years with that optimistic 7% would end up with $1.8M. This scenario to me, even the math makes sense to go this route. What am I missing here? Thanks for your input.

User avatar
grabiner
Advisory Board
Posts: 27202
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by grabiner » Sun Apr 19, 2020 11:24 pm

oleblue wrote:
Sun Apr 19, 2020 10:39 pm
I did leave out the mortgage 3% all together and took only the investment returns in account with an optimistic 7% for the market. Counting the mortgage, this is the way I was thinking about it, please correct me if I'm missing something. It doesn't seem to change much.

Starting with $500K and adding $6K a month for the next 2 years invested at an optimistic 7% and then stopping, then letting that amount sit for 13 years at that same 7% would end up with $1.75M. I would be making a guaranteed 3% return on the $1700 a month I would be paying the mortage with for those 13 years in this example.

Starting with $500K and paying off the house the next 2 yrs with that $6K a month would earn me a guaranteed rate of 3% on that $6K a month, then investing $1700 for the next 13 years with that optimistic 7% would end up with $1.8M. This scenario to me, even the math makes sense to go this route. What am I missing here? Thanks for your input.
What doesn't check here is the payment amount. The principal and interest payment on a 15-year $150K mortgage at 3% is not $1700, but $1036. If you are actually paying $1700, that includes escrow for taxes and insurance, which you will still have to pay after the mortgage is gone, so you have only $1036 to invest. And it would take $6447 per month, not $6000, to clear the mortgage in 24 months. Redoing the calculations with those numbers says that your total is $1.78M if you don't pay off the mortgage, and $1.70M if you do. (The only reason these numbers are so close is that most of the value comes from the original $500K, which contributes $1.38M to the totals. If you look just at the money invested because it is not used in mortgage payments, you get $398K versus $322K.)

So this confirms the original point. The expected return from paying off the mortgage quickly is lower, but there is less risk involved, and you have to decide on the trade-off.
Wiki David Grabiner

Topic Author
oleblue
Posts: 142
Joined: Tue Oct 06, 2009 1:37 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by oleblue » Mon Apr 20, 2020 3:21 am

grabiner wrote:
Sun Apr 19, 2020 11:24 pm

What doesn't check here is the payment amount. The principal and interest payment on a 15-year $150K mortgage at 3% is not $1700, but $1036. If you are actually paying $1700, that includes escrow for taxes and insurance, which you will still have to pay after the mortgage is gone, so you have only $1036 to invest. And it would take $6447 per month, not $6000, to clear the mortgage in 24 months. Redoing the calculations with those numbers says that your total is $1.78M if you don't pay off the mortgage, and $1.70M if you do. (The only reason these numbers are so close is that most of the value comes from the original $500K, which contributes $1.38M to the totals. If you look just at the money invested because it is not used in mortgage payments, you get $398K versus $322K.)

So this confirms the original point. The expected return from paying off the mortgage quickly is lower, but there is less risk involved, and you have to decide on the trade-off.
Thank you for clearing that up. Makes perfect sense. I can't figure where the $398K and $322K came from though. Told you I'm slow at math. :confused

For the $1700 number, my P&I is $1036, my taxes and insurance are $265 and the other $400 is extra I put towards principal every month. With the numbers being so close, I'm pretty sure I'm gonna go with paying off the mortgage. I'll sleep even better knowing I am debt free during ER.

I will say it feels weird to just turn off investing for 2 years and throw that amount toward a house. I'm getting my head wrapped around it though and weighing all options. These numbers help my decision.

User avatar
grabiner
Advisory Board
Posts: 27202
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by grabiner » Mon Apr 20, 2020 9:16 am

oleblue wrote:
Mon Apr 20, 2020 3:21 am
grabiner wrote:
Sun Apr 19, 2020 11:24 pm

What doesn't check here is the payment amount. The principal and interest payment on a 15-year $150K mortgage at 3% is not $1700, but $1036. If you are actually paying $1700, that includes escrow for taxes and insurance, which you will still have to pay after the mortgage is gone, so you have only $1036 to invest. And it would take $6447 per month, not $6000, to clear the mortgage in 24 months. Redoing the calculations with those numbers says that your total is $1.78M if you don't pay off the mortgage, and $1.70M if you do. (The only reason these numbers are so close is that most of the value comes from the original $500K, which contributes $1.38M to the totals. If you look just at the money invested because it is not used in mortgage payments, you get $398K versus $322K.)

So this confirms the original point. The expected return from paying off the mortgage quickly is lower, but there is less risk involved, and you have to decide on the trade-off.
Thank you for clearing that up. Makes perfect sense. I can't figure where the $398K and $322K came from though. Told you I'm slow at math. :confused
I set up a spreadsheet to calculate the return from the monthly payments of $6447 for 24 months and no new investment after that, increasing by 1.07^{1/12} every month for 15 years; that total was $398K. Similarly for $1036 invested every month for 180 months. And if you start with $-150K (a mortgage) and set the rate of return to 3% instead of 7%, both investments wind up at zero, so either set of payments will clear that mortgage in 15 years. Your choice is to make one set of payments for the mortgage, and the other set for investment.
For the $1700 number, my P&I is $1036, my taxes and insurance are $265 and the other $400 is extra I put towards principal every month. With the numbers being so close, I'm pretty sure I'm gonna go with paying off the mortgage. I'll sleep even better knowing I am debt free during ER.
OK, so my math checks. With your extra principal payments every month, you were already shortening the mortgage, so it would be cleared in less than 15 years.
Wiki David Grabiner

bgf
Posts: 1534
Joined: Fri Nov 10, 2017 9:35 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by bgf » Mon Apr 20, 2020 9:21 am

This depends entirely on whether you are a HEDGEFUNDIE or a Klangfool.

Figure out which one you are and act accordingly.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

-ryan-
Posts: 116
Joined: Fri Mar 01, 2019 7:14 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by -ryan- » Mon Apr 20, 2020 9:57 am

I always see people discuss paying off a mortgage in terms of a risk free return equal to the interest rate of the mortgage, but that's not actually true. The math is a little more complicated because you are not doing an apples to apples comparison. My mortgage, for example, has 22 years left and a rate of 4.125%. If I used my savings and investments to pay it all off tomorrow, you would think I was getting a 'risk free return of 4.125%', but in fact it would be the equivalent of a return on that money of about 1.90%.

The math becomes more complicated but still valid when discussing the merits of paying extra on your mortgage vs. saving/investing that amount over the same duration.

User avatar
JoeRetire
Posts: 5291
Joined: Tue Jan 16, 2018 2:44 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by JoeRetire » Mon Apr 20, 2020 10:02 am

oleblue wrote:
Sun Apr 19, 2020 12:45 am
However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.
We all get to decide how much our sleep is worth.
Lets assume a person was 37 years old, has been investing for years and has "enough" money in investments and emergency funds for their particular situation. Today, they have a $150K balance on a 15 yr, 3% mortgage, and are planning to ER in exactly 2 years with a decent pension/medical for the rest of their life. During these last two years of work, that person has $6K a month to either invest, or pay off the house over that time and be debt free when going in to ER.

Keep in mind after ER at age 39, the $1,700 mo that would have been the house payment, will now be free'd up for extra cash flow and invested for the next 15 years or longer.

I think I would pay off my house the next two years and be debt free at ER, based off this situation. I would be really interested to see this math 15 years from now when you're only talking about a two year "not investing" but paying down the house scenario vs.15 or 30 years. Thoughts?
To me, retiring at the young age of 39 would be all the more reason to keep as much of my assets liquid rather than in the walls of my house, as a hedge against an unpredictable future. A low 3% rate won't change over the 15 years - market conditions and inflation might.

But I don't have that particular sleeping problem. Your mileage may vary.
Last edited by JoeRetire on Mon Apr 20, 2020 10:07 am, edited 1 time in total.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

User avatar
JoeRetire
Posts: 5291
Joined: Tue Jan 16, 2018 2:44 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by JoeRetire » Mon Apr 20, 2020 10:03 am

oleblue wrote:
Sun Apr 19, 2020 8:06 am
This first example is assuming starting with 0 investable assets.

What did I miss here?
Retiring at 39 with no investable assets?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.

User avatar
grabiner
Advisory Board
Posts: 27202
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by grabiner » Mon Apr 20, 2020 10:05 am

-ryan- wrote:
Mon Apr 20, 2020 9:57 am
I always see people discuss paying off a mortgage in terms of a risk free return equal to the interest rate of the mortgage, but that's not actually true. The math is a little more complicated because you are not doing an apples to apples comparison. My mortgage, for example, has 22 years left and a rate of 4.125%. If I used my savings and investments to pay it all off tomorrow, you would think I was getting a 'risk free return of 4.125%', but in fact it would be the equivalent of a return on that money of about 1.90%.
This is not correct. If you make enough of a payment to shorten the mortgage by 1 month, you have a 22-year return of 4.125% on that payment. Then, if you make another (slightly larger) payment to shorten the mortgage by 1 month, you have a 4.125% return on that payment for 21 years and 11 months, and so on until the very last extra payment earns an annual rate of 4.125% for just one month.

You are getting your 1.90% value by computing the interest savings and treating it as all coming 22 years from now; actually, it comes every month, and if you can invest it at 4.125%, you will break even whether you pay off your mortgage or not.
Wiki David Grabiner

deltaneutral83
Posts: 1634
Joined: Tue Mar 07, 2017 4:25 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by deltaneutral83 » Mon Apr 20, 2020 10:07 am

Would love some data on homeowners who bought in 1998-2000 and chose to invest the difference in the S&P (or something similar) and stretch out a 30 year mortgage.

User avatar
willthrill81
Posts: 19257
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by willthrill81 » Mon Apr 20, 2020 10:09 am

oleblue wrote:
Sun Apr 19, 2020 12:45 am
Many of these discussions assume investing vs paying off the house over a long period of time, 10 to 30 years. The math will almost always say it's better financially over that long of a term to invest. However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.

Lets assume a person was 37 years old, has been investing for years and has "enough" money in investments and emergency funds for their particular situation. Today, they have a $150K balance on a 15 yr, 3% mortgage, and are planning to ER in exactly 2 years with a decent pension/medical for the rest of their life. During these last two years of work, that person has $6K a month to either invest, or pay off the house over that time and be debt free when going in to ER.

Keep in mind after ER at age 39, the $1,700 mo that would have been the house payment, will now be free'd up for extra cash flow and invested for the next 15 years or longer.

I think I would pay off my house the next two years and be debt free at ER, based off this situation. I would be really interested to see this math 15 years from now when you're only talking about a two year "not investing" but paying down the house scenario vs.15 or 30 years. Thoughts?
For those in retirement, it can be definitively and mathematically proven* that retaining debt, even very low interest rate, in retirement increases sequence of returns risk. This is because the debt must be paid every month even if the retiree's portfolio suffers. Further, the retention of debt results in effectively leveraging your portfolio, and leverage makes the bad times even worse as well as the good times better.

*There is a very specific set of circumstances where this is not true, but one of the needed elements is that the retiree can earn a higher guaranteed, after-tax return from their fixed income than the after-tax mortgage rate, which is rarely true for anyone now because interest rates have been generally declining for ~40 years.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
willthrill81
Posts: 19257
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by willthrill81 » Mon Apr 20, 2020 10:12 am

deltaneutral83 wrote:
Mon Apr 20, 2020 10:07 am
Would love some data on homeowners who bought in 1998-2000 and chose to invest the difference in the S&P (or something similar) and stretch out a 30 year mortgage.
In early 2000, 30 year mortgage rates were a little above 8%. Since then, U.S. stocks have returned 5%. So paying down/off the mortgage from the beginning would have been significantly better, especially since it was guaranteed and non-volatile. This was also true of mortgage rates back in and stock returns since 1999 and 1998 (and 2001 and 2002), though the difference between the two was smaller.

The actionable lesson from this is that even over the long-term, stocks can underperform your mortgage, especially on an after-tax basis and even more so on a risk-adjusted basis.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

mptness
Posts: 163
Joined: Sun Jun 03, 2012 3:54 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by mptness » Mon Apr 20, 2020 10:26 am

bgf wrote:
Mon Apr 20, 2020 9:21 am
This depends entirely on whether you are a HEDGEFUNDIE or a Klangfool.

Figure out which one you are and act accordingly.
Or better yet, be a grabiner. He has offered the best unemotional, risk adjusted, mathematically correct advice on this subject for longer than I have been a member here. I don't believe than this is a different spin on the question.

protagonist
Posts: 6487
Joined: Sun Dec 26, 2010 12:47 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by protagonist » Mon Apr 20, 2020 10:32 am

I find it odd that most Bogleheads, seem to me to be strongly against debt of any other kind (assuming they can make more in interest in the bank), and yet they are pro-"mortgage", which is just a more pc way of saying "huge debt".

Stocks do not offer the security of a roof over your head, nor do they offer you (and this is huge in my mind, though admittedly how huge is subjective) the incredible peace of mind that comes from not owing anybody money and knowing that everything you "own" is yours.

Putting 10-20% down on a house "if you can afford it" also encourages living beyond one's means... it's like thinking "I could afford a Toyota, but I'd rather put 10-20% down and get a Lamborghini".

You can work all the mathematical models you would like but the truth is that the future of both the stock market and real estate market is uncertain and the best you can do is guess. What always seems to make sense, however, is to stay out of debt and keep life simple.

bgf
Posts: 1534
Joined: Fri Nov 10, 2017 9:35 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by bgf » Mon Apr 20, 2020 11:34 am

mptness wrote:
Mon Apr 20, 2020 10:26 am
bgf wrote:
Mon Apr 20, 2020 9:21 am
This depends entirely on whether you are a HEDGEFUNDIE or a Klangfool.

Figure out which one you are and act accordingly.
Or better yet, be a grabiner. He has offered the best unemotional, risk adjusted, mathematically correct advice on this subject for longer than I have been a member here. I don't believe than this is a different spin on the question.
I'll have to go back and find those posts!
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

User avatar
grabiner
Advisory Board
Posts: 27202
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by grabiner » Mon Apr 20, 2020 11:54 am

mptness wrote:
Mon Apr 20, 2020 10:26 am
bgf wrote:
Mon Apr 20, 2020 9:21 am
This depends entirely on whether you are a HEDGEFUNDIE or a Klangfool.

Figure out which one you are and act accordingly.
Or better yet, be a grabiner. He has offered the best unemotional, risk adjusted, mathematically correct advice on this subject for longer than I have been a member here. I don't believe than this is a different spin on the question.
Much of what I believe is discussed on the wiki: Paying down loans versus investing The basic principle is that you should split the decision into two: How much risk should you take? Should you pay down the loan or invest? If you consider paying down the loan while keeping your risk level constant (selling low-risk bonds to pay it down), then you have a fair comparison; you can compare the difference in returns, and the value of other benefits such as liquidity.

For my own decision not to pay off in 2019, and to pay off in 2020, and all the objective considerations that went into it: Finally considering paying off my mortgage (and a followup, The option value of not paying off a mortgage, on an important issue I missed when I started the 2019 thread).
Wiki David Grabiner

MathWizard
Posts: 4181
Joined: Tue Jul 26, 2011 1:35 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by MathWizard » Mon Apr 20, 2020 12:10 pm

Liquidity was the reason I did not pay ahead on the mortgage, but waited to until I could completely pay off the
mortgage and still have a reasonably sized short term liquidity fund (aka Emergency Fund) rather than just pay ahead.

Liquidity is discussed in the Wiki.

I did pay the off the house loan 13 years early.

This may not have been optimal, as I may have had more money by investing and waiting to pay it it off, but I liked
reducing my monthly required spend.

-ryan-
Posts: 116
Joined: Fri Mar 01, 2019 7:14 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by -ryan- » Mon Apr 20, 2020 1:05 pm

grabiner wrote:
Mon Apr 20, 2020 10:05 am
-ryan- wrote:
Mon Apr 20, 2020 9:57 am
I always see people discuss paying off a mortgage in terms of a risk free return equal to the interest rate of the mortgage, but that's not actually true. The math is a little more complicated because you are not doing an apples to apples comparison. My mortgage, for example, has 22 years left and a rate of 4.125%. If I used my savings and investments to pay it all off tomorrow, you would think I was getting a 'risk free return of 4.125%', but in fact it would be the equivalent of a return on that money of about 1.90%.
This is not correct. If you make enough of a payment to shorten the mortgage by 1 month, you have a 22-year return of 4.125% on that payment. Then, if you make another (slightly larger) payment to shorten the mortgage by 1 month, you have a 4.125% return on that payment for 21 years and 11 months, and so on until the very last extra payment earns an annual rate of 4.125% for just one month.

You are getting your 1.90% value by computing the interest savings and treating it as all coming 22 years from now; actually, it comes every month, and if you can invest it at 4.125%, you will break even whether you pay off your mortgage or not.
I see what you are saying, and stated that way it makes more sense than the way it has been presented in the past.

striker79
Posts: 71
Joined: Sun Dec 31, 2017 10:38 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by striker79 » Mon Apr 20, 2020 2:31 pm

No one knows what the market is doing right now, I would be putting payments into the house. I would also want money over the next year to be able to put into the market as it will be a good time to buy. I would be putting money into mortgage payments and wait until we have a more stable stock market before I put money into the stock market.

Leesbro63
Posts: 6590
Joined: Mon Nov 08, 2010 4:36 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by Leesbro63 » Mon Apr 20, 2020 2:49 pm

striker79 wrote:
Mon Apr 20, 2020 2:31 pm
No one knows what the market is doing right now, I would be putting payments into the house. I would also want money over the next year to be able to put into the market as it will be a good time to buy. I would be putting money into mortgage payments and wait until we have a more stable stock market before I put money into the stock market.
I agree with paying down/off the house, for most, in general. But your certainty about how "no one knows that the market is doing right now" versus at some point when they do is folly. There's ALWAYS a bull market case and a bear market case. We never know.

randomguy
Posts: 9039
Joined: Wed Sep 17, 2014 9:00 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by randomguy » Mon Apr 20, 2020 3:21 pm

oleblue wrote:
Sun Apr 19, 2020 12:45 am
Many of these discussions assume investing vs paying off the house over a long period of time, 10 to 30 years. The math will almost always say it's better financially over that long of a term to invest. However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.

Lets assume a person was 37 years old, has been investing for years and has "enough" money in investments and emergency funds for their particular situation. Today, they have a $150K balance on a 15 yr, 3% mortgage, and are planning to ER in exactly 2 years with a decent pension/medical for the rest of their life. During these last two years of work, that person has $6K a month to either invest, or pay off the house over that time and be debt free when going in to ER.

Keep in mind after ER at age 39, the $1,700 mo that would have been the house payment, will now be free'd up for extra cash flow and invested for the next 15 years or longer.

I think I would pay off my house the next two years and be debt free at ER, based off this situation. I would be really interested to see this math 15 years from now when you're only talking about a two year "not investing" but paying down the house scenario vs.15 or 30 years. Thoughts?

Here are two simple ways of looking at it
150k mortgage @3% is 1036/month for a 15 year mortgage.

a) invest 6k/month @ 7% for 13 years = 1.51 million
b) invest 4964/month for 15 years = 1.558 million (I I think there is actually another 24k that gets invest in the first 24 months but I don't feel like redoing the math which would give you another 50k but I don't feel like redoing the math )

So if you hate money pay off the house:) Obviously we are ignoring things like taxes and the fact you don't get steady returns.

The other way is to imagine you have 150k. Are you better off
a) paying off the mortgage
b) investing it and taking out 1036/month for the next 15 years

Well if you make 4%, you will have an extra 18k after 15 years. If you. make 7%, you will have an extra 98k

If you are making more than the interest payments, you aren't going to come out ahead by prepaying.

Now if you are in retirement, you might be willing to give up money for risk reduction. That is fine. But you are paying for that risk reduction.

huskerfan1414
Posts: 139
Joined: Wed Mar 11, 2020 7:51 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by huskerfan1414 » Mon Apr 20, 2020 8:19 pm

I can’t wrap my head around people on this forum not wanting to pay off a house. Not saying I’m smarter, quite the contrary...I’m too dumb to wrap my head around it. Whenever I see these threads I think paying off the house would be a no brainer for me, (assuming this is the house you want to stay in).

I also saw a thread today where bogleheads who I thought were conservative about debt told a poster to take on debt and buy a new truck :confused :confused

It just all comes down to individual preferences. It sounds to me OP like you really want to pay off the house and are looking for people to give you a good reason not to just to be sure. Have you seen anything in this thread to make you second guess it? I haven’t, but again thats just me.
The more I learn, the dumber I feel.

lakpr
Posts: 5409
Joined: Fri Mar 18, 2011 9:59 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by lakpr » Mon Apr 20, 2020 8:42 pm

willthrill81 wrote:
Mon Apr 20, 2020 10:12 am
In early 2000, 30 year mortgage rates were a little above 8%. Since then, U.S. stocks have returned 5%.
......
The actionable lesson from this is that even over the long-term, stocks can underperform your mortgage, especially on an after-tax basis and even more so on a risk-adjusted basis.
This is a bit too simplistic, and ignores the option that homeowners with mortgage can refinance when rates fall, and did.

I bought my very first home in October 2000 at 7.5% 15 year mortgage. Since then I refinanced that lian twice dropping down to 6.5%, then 5.25%, sold the home in 2008. Picked a new mortgage at 6.5%, refinanced it thrice again to 4%, 3.25% and finally 2.5% on an ARM

I agree that on a risk adjusted basis, paying off mortgage is always a better deal. I had paid off my mortgage last year in fact, after finding that I cannot deduct interest any more and my 2.5% interest rate was essentially equivalent to 3.25% in 2017 terms.

User avatar
willthrill81
Posts: 19257
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by willthrill81 » Mon Apr 20, 2020 8:47 pm

lakpr wrote:
Mon Apr 20, 2020 8:42 pm
willthrill81 wrote:
Mon Apr 20, 2020 10:12 am
In early 2000, 30 year mortgage rates were a little above 8%. Since then, U.S. stocks have returned 5%.
......
The actionable lesson from this is that even over the long-term, stocks can underperform your mortgage, especially on an after-tax basis and even more so on a risk-adjusted basis.
This is a bit too simplistic, and ignores the option that homeowners with mortgage can refinance when rates fall, and did.

I bought my very first home in October 2000 at 7.5% 15 year mortgage. Since then I refinanced that lian twice dropping down to 6.5%, then 5.25%, sold the home in 2008. Picked a new mortgage at 6.5%, refinanced it thrice again to 4%, 3.25% and finally 2.5% on an ARM

I agree that on a risk adjusted basis, paying off mortgage is always a better deal. I had paid off my mortgage last year in fact, after finding that I cannot deduct interest any more and my 2.5% interest rate was essentially equivalent to 3.25% in 2017 terms.
Yes, refinancing along the way would have reduced the total cost of the mortgage significantly, though closing costs should not be forgotten. But the point remains that recent history has shown that stocks are not destined to outperform mortgage interest rates, even on an absolute basis and in the long-term, as many seem to believe.

You must have paid quite a lot in closing costs over the last 20 years with seven mortgages.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
AerialWombat
Posts: 1512
Joined: Tue May 29, 2018 1:07 pm
Location: Cash Canyon / Cashville

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by AerialWombat » Mon Apr 20, 2020 8:53 pm

I frequently play around with this question in a financial planning modeling software. No matter what my bearish set of assumptions, I cannot find a model in which paying off mortgages early creates a better financial outcome than putting the money into my securities portfolio instead.

But it doesn’t matter. Peace of mind wins out over math for me.

lakpr
Posts: 5409
Joined: Fri Mar 18, 2011 9:59 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by lakpr » Mon Apr 20, 2020 10:21 pm

willthrill81 wrote:
Mon Apr 20, 2020 8:47 pm
You must have paid quite a lot in closing costs over the last 20 years with seven mortgages.
Probably I did. But in all cases, the drop in interest rates had been rather steep and I could break even between 11 to 18 months after refinancing, I usually stayed at least that long.

Topic Author
oleblue
Posts: 142
Joined: Tue Oct 06, 2009 1:37 pm

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by oleblue » Wed Apr 22, 2020 7:45 am

Well, I started the process today. I made my normal monthly contribution to my taxable brokerage and SEP IRA, then I cancelled the automatic draft and diverted that money to the mortgage payment. It felt weird I have to say, to turn off those automatic contributions I've had set up for years.

According to my calculations, the mortage will now be paid off in 21 months from now hopefully sooner. I'm gonna throw any extra I have at it. Once the mortgage is paid off, I will turn the auto contributions back on and start contributing again, although not as much because I will be ER'd, but I will still continue to contribute.

This was not a decision I took lightly and one that I have been pondering and calcluating over since I got the mortgage last June. I will report back once it's paid off and see where I am at. I absolutely know that it will be a great feeling to be debt free and I'll be able to ER with no hesitations once I don't have any obligations other than the normal stuff, insurance, taxes, food, etc. Simple living and peace of mind at its finest. Thanks to Grabiner for your math, that really helped and to the others that contributed your wisdom.

User avatar
ThunderTurtle
Posts: 67
Joined: Fri Feb 08, 2019 11:47 am
Location: Texas

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by ThunderTurtle » Wed Apr 22, 2020 8:13 am

Excellent. I think you had answered your own question in the beginning.
However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.
Me too and it's easier to invest more without debt.

randomguy
Posts: 9039
Joined: Wed Sep 17, 2014 9:00 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by randomguy » Wed Apr 22, 2020 8:40 am

ThunderTurtle wrote:
Wed Apr 22, 2020 8:13 am
Excellent. I think you had answered your own question in the beginning.
However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.
Me too and it's easier to invest more without debt.
It is much easier to invest when you have money in your pocket rather than locked up in a house:)

lakpr
Posts: 5409
Joined: Fri Mar 18, 2011 9:59 am

Re: Different Spin on the question of "Should I pay of the house or Invest.."

Post by lakpr » Wed Apr 22, 2020 8:45 am

randomguy wrote:
Wed Apr 22, 2020 8:40 am
ThunderTurtle wrote:
Wed Apr 22, 2020 8:13 am
Excellent. I think you had answered your own question in the beginning.
However, I'm in the camp of no debt, I sleep better at night knowing I don't owe a buddy $10 much less $150K to a bank.
Me too and it's easier to invest more without debt.
It is much easier to invest when you have money in your pocket rather than locked up in a house:)
"Investing" is locking up money in CDs and stocks and bonds!!

Post Reply