Hi,
I am at point where I have enough money saved so I can payoff my house mortgage which is 15 year @ 5.5 (12 years left) but I am not sure either to payoff the loan or invest somewhere else to make more than 5%. Please advice

Thanks

If you have a 5% mortgage rate, then I would invest the money in some high-yield aggressive mutual funds which are earning at the 14-18% mark. Or even in some very solid long-term CDs at an 8-9%.

Don't worry about paying down the mortgage too fast. It's great to be completely debt free, but if you put all of your money into getting rid of the debt, especially long term low interest debt like this, you will be in a very poor position if an emergency comes up. You want to keep a fair amount of cash reserves (money markets are always a good choice for this, as are short term CDs that only lose the accrued interest if you sell before the term is up). If you've paid down this debt and suddenly need that money for an emergency, you aren't going to get a 5% rate and are going to end up in a much worse position.

Once you have the cash reserves up to a decent level (I hate having less than six months of bills available in reserve, personally), then start looking into investments. Avoid anything aggressive with money that you might need, because aggressive investments are volatile: Yes, they gain value in the long run, but if you need that money while they're down in value, then you have no choice but to take the loss. Diversify, make sure that you have a balance of core and growth assets before dealing with anything aggressive.

I agree with the poster above. Put six months of emergency funds into a money market account (unless you already have), then max out a Roth IRA then I would put the rest into good mutual funds (with a ten year + track record) Your interest rate is good on the house, you should just pay the mortgage as normal. The Mutual funds will earn you money in the long run and you will be happier about that in the future. You should read up about Dave Ramsey, he gives good solid financial advice... no tricks, he just tells you the most lucrative ways to save your money. He has a great plan that has pulled my husband and I out of debt and help secure our future and that of our child (education funds). I really support him, because he doesn't have any quick gimmick like the other people do, and he has millions of people, including us, who the plan has worked for. Good luck

Problem with this forum is it's hard to tell who is a US poster. If you are a Canadian, I advise you payoff the mortgage, then re-borrow and then invest. You will have now made your mortgage interest costs tax deductible.

A paid off home is wise. Before investing

Why Pay Off Home Instead of Invest?

Good rule of thumb, if you can invest with a higher interest rate than your debt has, then invest. But, weigh out your options. It may benefit you more to pay off your debt, ecspecially your home. Piece of mind is worth more than gold.

I would pay off the mortgage, ( then it is paid off and you can't lose your home if investments go belly up) can everyone say ENRON, or tech stocks.

Then take the money you were paying on the mortgage and invest it.

If I go to the grocery store and buy a loaf of bread for $3 - I'm not going to give them $5 and walk away.

Whenever possible, pay off loans that you are paying interest on.

Hi AW805,

The thing is that you may pay $5 over a period of 10 years by taking $3 today. But what you have to watch out is inflation. Can $3 today buy you more than $5 ten years later. In case inflation is high why pay off the loan?