Posted on: 30th Nov, 2007 06:53 am
When is it a good time to pay off a mortgage?
We have a 15 year mortgage at 5.75%. We have been paying $1200 extra per year towards the principle. However, we could easily pay off the mortgage which has a remaining balance of $30,000. Since the standard deduction (Income taxes) is better for us, the interest paid is money out the door. If we can pay off the $30,000 instead of just letting it sit in a money market or stock fund, would this be the sensible thing to do?
We have a 15 year mortgage at 5.75%. We have been paying $1200 extra per year towards the principle. However, we could easily pay off the mortgage which has a remaining balance of $30,000. Since the standard deduction (Income taxes) is better for us, the interest paid is money out the door. If we can pay off the $30,000 instead of just letting it sit in a money market or stock fund, would this be the sensible thing to do?
you will need to speak to a financial planner.
your age/investments/retirement will be a determining factor.
your age/investments/retirement will be a determining factor.
Is it sitting in a mutual fund or stock now? What are your earnings?
Many who have read my posts know, I am all about paying off the mortgage. It is not always the best decision, but it is never a bad decision. What I mean is this... sure you can save money by keeping your money in investments... but you could lose money also.
The best way to figure it out is to put it all on paper. We need to figure out how much the mortgage costs you, TOTAL. And then figure out how much you would make through investing, TOTAL.
Many who have read my posts know, I am all about paying off the mortgage. It is not always the best decision, but it is never a bad decision. What I mean is this... sure you can save money by keeping your money in investments... but you could lose money also.
The best way to figure it out is to put it all on paper. We need to figure out how much the mortgage costs you, TOTAL. And then figure out how much you would make through investing, TOTAL.
Eric could not have said it any better. It's also about your risk tolerance. Many people like the security of not having a payment, so they sleep better at night, especially if they near retirment age and income might drop a lot. On the other hand, for a more sophisticated investor, there can be some great returns and your $30,000 could grow to many times that over time. Yes....it could go down, and yes, it could grow exponentially. Education and a good financial planner like mentioned above is a good way to go.
If you feel confident that you can make a better return than 5.75 in a mutual fund or stocks then that would be the way to go. But you might not make that much. You could end up with a loss. It just depends on how risky you want to be. If you want to play it safe and pay off the mortgage then you are basically getting a 5.75 return on your money without risk.
