Some people live by the old "NEVER PAY OFF A MORTGAGE" you can always do better in the market.

Other people are happy just paying off debt and knowing it is no longer a liability.

I do not invest much ($10k tops).... i suck at investing. I have paid off most of my rental houses and my cars but still have 2 fairly large mortgages on my home and on an expensive rental house. no credit card debt.

What do you do?


edit - my home mortgage is only 4.75% but I still pay extra on it which is probably dumb but I will be happy when it is completly paid off..

 

The math is easy, can you make more on the market than the debt costs you? Also AMT and deductions factor into most people's calculations.

For a sound way to prepay-Do a google search for 13th mortgage payment (http://www.fastfind.com/Auto/BRMortCalc.asp)

Afaik, in most markets, the house gains value pretty fast, while most people aren't maxing out teir retirement which often get a match and tax benefits. The only need to pay off a house that I can see is if you plan on living in it forever and your income is likely to drop.

 

My dad was somewhat upset that he paid off his mortgages for my mom's house and his house after realizing he could have put that money in the market somehow, but I guess it's a decent starting point to say you own both your houses. This is a sort of "Am I comfortable with the money I have now, or do I want even more?", so it could go either way depending on who you are.

 

Basically, if you can make more on interest (minus taxes) than you pay in interest on your mortgage, then it makes sense to invest. Now is not a good time for the casual investor to try and make some money though.

So, for example, I paid off my S2k car loan recently in full (5.07%) because of dropping interest rates, but I still make monthly payments on student loans at 3.25% because investments minus taxes on dividens and interest is still easily above this.

 

Heh. Good day to ask. Have you seen the stock market lately? Might as well have hid all the money in a mattress for a year or so!

To me debt-free is very smart but not if you don't have a liquid buffer for emergencies. Some people counter that ready credit is liquid enough. Not me, I've seen instant changes in access (accounts closed or withdrawls denied). So... I've still got a mortgage, plus I spend too much on vehicles!

 

I've had CC debt since college (12/97). the day i pay it off (now estimated at 04/09) will be a very happy day and never again will i get myself into the hole i dug this time around. it's manageable but completely unnecessary.

 

I pay down my mortgage when I have a few extra bucks as I don't want to be paying that same damn bill in 27 years from now. Just paying the regular monthly payment has minimal effect on a mortgage in it's infancy so I like to scoot it along by adding in a thousand here and there.

 

I would agree with the "never pay off a mortgage" in theory but there is also risk aversion. Market returns are not a cinch. (see my portfolio returns for 3rd quarter 2007)


I will only accelerate payment on my mortgage enough to have it paid of at the date of my retirement. Any more than that would be wasted IMHO. Who wants a $1000+ expense every month when you want to travel and live it up?

Right now I want to retire at 55 and at my current pace my house is paid off when I am 58, but that will be corrected.

 

[QUOTE=vader1,Jan 22 2008, 05:20 PM] I would agree with the "never pay off a mortgage"

 

I'm not a fan of the stock market or even mutual funds. My mutual funds lost money (barely - 0.02% or something) this year (I don't touch them - I let the group manager do it all for me) so I'm not exactly sure I could do any better. If I get some time, I might sit down and learn a while but I prefer to just knock out debts one after the other. I'd like to finish my house in less than ten years...

I don't trust the stock market but that's partially because I don't fully understand it. I'd rather own everything and owe nothing, personally. If hard times hit and you don't owe anyone anything, it's much easier to make ends meet. It also helps to live within your means.

I know it's not necessarily the best "money" decision all the time but tell that to the guy that gets wiped out in the market some day. I know plenty that lost more than they could afford because they felt the market would always rebound or pick up again (in time for them to be able to pull money out and live off it).

Having lots in the market only means there's lots to lose as well.

Short answer: I pay off debt before I invest. I still invest as a habit (pre-tax, through work, roughly 10% of my income) and I'll be a millionaire or better by the time I retire if things go as planned, but I'd still rather not owe money.