I bought a house less than 1 yesr ago. I paid $317,000. I put 150K down. At present I owe 163K. I have $164K. Both my wife and I are retired military and bring home after taxes $5700 per month and then I work part time and bring home $2,000 per month. That means $7700 per month after taxes.
We have 3 cars that are paid for.
I am 50 and she is 44 years old. We have 2 children under 10 years old. We have already paid the 4 year college plan off for my kids

I have additional stocks and mutual funds but they have not excelled.

I want to pay off my mortgage and then save / invest the same amount of money per month I would be paying monthly for a mortgage payment.


We I look at my monthly mortgage statement and see that my payment of $1700; $800 per month goes to interest.

What do you say??

Stratmando

I would say, If you Are set and have what you need, Pay off the house, it is a good investment.
If you wanted a Plane or other Large expensive. Buy that, enjoy the plane and travel, your monthly should take care of the rest.
Are you looking to adopt, please call?

Fr_Chuck

Well I am not sure, what is the interst rate on the home mortage,
If you are looking at something in the 5 percent range, you may make more interest on your money by proper investments into qualified retirement plans.

You have to consider the tax savings on the mortage interest and the tax savings on the retirement plans.

But I doiubt at this point there is a wrong choice, just two or three all good choices

Altenweg

Most banks will charge you a fee if you pay off the mortgage early, you are usually only allowed to pay a certain percentage above the mortgage payments per year. Having said that, I'd check with your bank and see what the fee would be, even with a fee you will still save allot of money in the long run.

Good Luck.

Loan_Guy

WOW, I think you are in a great position financially. Congrats!

There are a couple schools of thought here. Probably the most important part of this answer depends on where you live and what the housing situation is like where you are. If you are seeing slow and steady appreciation such as we are here, you can probably be a little more aggressive. If you are on a coast, Vegas, Phoenix, or somewhere values are plummeting, I would be a little less aggressive. Another question is how long you intend to live there.

All that said, here are my thoughts as a professional mortgage planner. I suggest you do you due diligence before acting on anything.

Some people will tell you that you should pay your house off and invest the payments; the American dream is to own your home free and clear. If it were me, I would take out a $100,000 low fixed rate equity loan and give the proceeds to a good financial planner. Here's why:

If you take out more than $100,000, you will lose some of the tax benefits. Check with your CPA to verify for your particular situation. It's called equity indebtedness.

Look at your AFTER TAX interest rate. If you can borrow at even 5-6% and get 7-8% on your investment, you are making money. That's how banks work; it's called arbitrage.

Most importantly, house are for holding people, not money. Equity has no appreciation, meaning this if your house is worth $5,000 more next year, it will be worth the same regardless of whether you owe $300,000 or nothing.

Most importantly, and ask anyone that ever lost their house, it is better to make the bank take the risk than you. You can have the peace of mind knowing that you have enough in your investment account to pay off the mortgage any time you want, but since you are making more than it is costing you, you are increasing your worth.

Here's the other thing that happens..... Suppose you pay off the home and have $300,000+ in equity. God forbid, but something happens to you and you are disabled or even killed. You wife goes to the local bank and tries to remove some equity for living expenses, etc., but she is told that her income level is not high enough to cover the new and existing debt, so she is turned down for the loan. The only other way to extract the equity would be to sell the home.

I'm not trying to scare anyone, and certainly check with your tax planner and CPA, but generally it is better to have a lot of cash on hand where you COULD pay off the house if you wanted, but because of tax advantages, etc., you just let it grow.

A couple great books on this topic are Missed Fortune 101 by Douglas Andrew and Ordinary People, Extraordinary Wealth by Ric Edelman.

Hope this helps.....

LG