Payoff mortgage early or invest extra $

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Topic Author
Fishing2retire
Posts: 163
Joined: Mon Jun 10, 2019 2:02 pm

Payoff mortgage early or invest extra $

Post by Fishing2retire »

We have an extra $500 a month to use.
Option 1. Pay an extra $500 month towards 15 year mortgage at 2.6% interest
Option 2. Open brokerage account and put that money into VTSAX vanguard total stock market.

If we pay down
Mortgage early it will knock 5 years off the 15 year note and will be paid off before I retire.

If we invest in the brokerage account earning a 6% return will yield roughly $80K in 10 years.

Thanks in advance.
millennial1995
Posts: 26
Joined: Fri Jan 19, 2024 1:05 pm

Re: Payoff mortgage early or invest extra $

Post by millennial1995 »

100% go the brokerage route at that mortgage rate. Even cash after taxes is paying more than 2.6%.
muffins14
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Location: New York

Re: Payoff mortgage early or invest extra $

Post by muffins14 »

Option 3: almost any money market or bond fund is paying more than 2.6%, so you can put the money there for low risk and earn a profit off the yield difference compared to your mortgage.

Deduct the interest on your taxes and invest the $500 somewhere/ anywhere. When bonds yield less than 2.6%, then reconsider
Crom laughs at your Four Winds
bombcar
Posts: 2187
Joined: Sun Aug 12, 2007 6:41 pm

Re: Payoff mortgage early or invest extra $

Post by bombcar »

Save it somewhere. When that amount is equal to the payoff amount, then you reconsider.
Hyperchicken
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Joined: Mon Mar 02, 2020 4:33 pm

Re: Payoff mortgage early or invest extra $

Post by Hyperchicken »

The answer very much depends on your age, how close you are to retirement, and your overall financial situation.

Also, the advice you get on this forum tends to be extremely conservative. Read what people tell you here, make everything twice as agressive, and proceed.
Pepper11
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Joined: Fri Jun 13, 2014 9:22 pm

Re: Payoff mortgage early or invest extra $

Post by Pepper11 »

Hyperchicken wrote: Tue Jul 09, 2024 11:49 am The answer very much depends on your age, how close you are to retirement, and your overall financial situation.

Also, the advice you get on this forum tends to be extremely conservative. Read what people tell you here, make everything twice as agressive, and proceed.
Yeah, a 10 Million portfolio at a 2% withdrawal rate is probably the only way this forum would agree is a safe time to retire.
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BrooklynInvest
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Re: Payoff mortgage early or invest extra $

Post by BrooklynInvest »

There are other considerations of course, but unless you already have a good-sized portfolio I'd start to invest the $500 in a brokerage account.

Given the low rate on your mortgage you might be a little better off over time, but you'll also be adding to your liquid wealth, which could come in handy.

Down the road you can always revisit or start to pay down the mortgage, but you'll have flexibility. Good luck OP!
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greg24
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Joined: Tue Feb 20, 2007 9:34 am

Re: Payoff mortgage early or invest extra $

Post by greg24 »

I'm a big fan of paying off the mortgage early, but it doesn't appear to make sense for your situation.
cmr79
Posts: 1523
Joined: Mon Dec 02, 2013 3:25 pm

Re: Payoff mortgage early or invest extra $

Post by cmr79 »

Invest and pay off the mortgage on schedule. There is no financial argument for paying an extra $0.01 towards it right now at your interest rate.
Topic Author
Fishing2retire
Posts: 163
Joined: Mon Jun 10, 2019 2:02 pm

Re: Payoff mortgage early or invest extra $

Post by Fishing2retire »

Thanks everyone for the suggestions looks like most favor the brokerage account.
somedays
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Joined: Tue Sep 27, 2022 7:14 am

Re: Payoff mortgage early or invest extra $

Post by somedays »

VTSAX has returned more than 6% over the past 10+ years.
https://www.morningstar.com/funds/xnas/ ... erformance
Topic Author
Fishing2retire
Posts: 163
Joined: Mon Jun 10, 2019 2:02 pm

Re: Payoff mortgage early or invest extra $

Post by Fishing2retire »

somedays wrote: Tue Jul 09, 2024 8:26 pm VTSAX has returned more than 6% over the past 10+ years.
https://www.morningstar.com/funds/xnas/ ... erformance
I was being conservative on that number. I hope it does continue to be higher.
KlangFool
Posts: 32755
Joined: Sat Oct 11, 2008 12:35 pm

Re: Payoff mortgage early or invest extra $

Post by KlangFool »

OP,

Option 4. Invest as per your asset allocation. You can do that by 100% stock index fund in your taxable account and add more bond in your tax advantaged accounts.

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
Topic Author
Fishing2retire
Posts: 163
Joined: Mon Jun 10, 2019 2:02 pm

Re: Payoff mortgage early or invest extra $

Post by Fishing2retire »

KlangFool wrote: Wed Jul 10, 2024 5:58 am OP,

Option 4. Invest as per your asset allocation. You can do that by 100% stock index fund in your taxable account and add more bond in your tax advantaged accounts.

KlangFool
Another good option
Thanks KlangFool.
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