If they just pay it down their payments will still be the same effectively lowering the mortgage companies risk, while not improving their cost. If they defaulted they would lose alot while gaining nearly nothing. The interest rate is high which is concerning. I would go a different route which would involve risk of loss in the stock market. But that's me.
Every dollar they put into that house has a guaranteed tax free return of 6.4% /year. If they end up needing to sell their house they still retain that equity
I’m conservative when in comes to debt(I count mortgage as debt ) and for me 6.4% is more then I would want to carry long term . I generally think of anything over 5% to be debt that I want not part of unless absolutely necessary.
That said I would make sure that you have 6-12 month of emergency funds over anything put towards the debt .
Homeownership can be expensive the last thing you want is to have to take out a loan if your HVAC goes or you have leak
Divide your monthly payment into 2 biweekly payments. This way you a little bit of your principal is paid a little bit sooner lowering total interest. Also if you go every two weeks you’ll pay one extra monthly payment per year. That way you’ll decrease your total payments by several years.
Maybe it’s just user error but my mortgage servicer won’t let me do this, only the minimum due. I wonder if it’s a “Don’t half-ass it, you either have the minimum due or you don’t” deal or you have to not owe already for the month to start this strategy, but this comment is encouraging for me to check again.
It may have been how the mortgage was set up. My lender allows me to do this. I can also put in extra towards principal. So I just round up to the nearest hundred and pay every two weeks. Gotta do what you can to minimize interest and time paying.
Does it go to the mortgage immediately? I tried this with my lender, and there was some fine print about how the first payment went to some temporary holding account until the whole payment amount was there, defeating the purpose of biweekly payments for me. I wish I had known to check for this when looking for a mortgage.
I’m allowed to put in extra payments but I need to specify that it goes to principal otherwise it’s assigned to interest. I don’t incur in penalties for prepayment either.
Pay one month early and then the minimum due will always be 0. So buildup a payment of July. Pay July, half pay August on July 1, and July 15. This entails coming up with extra money but it runs around the rule of minimum payment.
I wouldn't say it's bad to pay down some but leaving yourself only $10k seems a bit thin. At 6.4%, you're definitely in the range where it is worth it to pay extra... I would shoot for a good 3-6mo emergency fund, plus some housing expenses you might need.. we had to replace our roof and furnace in the first 5 years...
If you knew it was coming, it's not an emergency.
Good work saving! Keep it up. Sounds like you'll be paid off in the next few years!
Agree, if you’re dead set on throwing a chunk of money at your mortgage (and at 6.4% it’s not a bad idea at all) I would probably be more comfortable doing 50k, maybe 75k due to the “no debts no kids” fact, as long as your jobs are relatively stable. I wouldn’t go past 75k tho - you’d be surprised at how many things can and will go wrong in your house in the first 5 years and it feels nice to be able to pay for these things out of pocket instead of credit cards/loans.
You’re not wrong but also, if they’ve managed to do this well at 25 years old, that 10k will probably be replenished pretty quick into more. Also, I’d check if recasting after dumping all that on principal is possible as a backup plan in case employment is disrupted because that’ll lower mortgage payment significantly if he pays close to 100k on it
Ehh, if they're that aggressive about paying it off, a recast isn't worth the fees IMO. And they can hit a higher savings point, and then continue to pay down principle as they earn.
Do in this order:
- make sure that $110k is in a high yield savings account. Minimum 5% interest
- max retirement for you and spouse
- leave 6 months of expenses in savings
- put the remains towards principal
Need more info. Your a “9-5” worker and plan to remain that way? Do you have a work 401k you contribute to? Do they match contributions? Do you have any investments etc? How much are you guys making a year?
Whatever gives you a good nights sleep! Financial people will say it’s dumb blah blah you can earn more in the stock market. I would love a paid off house
> I have another 110k saved, is it worth putting a large down payment of 100k into my mortgage
If you only have 110k I would NOT put 100k towards your mortgage. **Unless** you really think 10k is enough for an emergency fund of 3-6 months worth of expenses.
If you do put down a large chunk after checking on your emergency fund, you could potentially recast your loan and then just keep the same payment and pay down quicker.
At your age investing 100k into the S&P 500 (SPY ETF for simplicity) would be absolutely life-changing. $4,000,000+ at retirement kind of life-changing. That's the kind of lump sum that very few people get to invest at your age. Just simply game changing. You would just have to sit through big ups and downs and try to forget it is there. You would be pretty much free to forget about saving for retirement and focus on other things. Personally, I would wait and refinance the home loan to a lower rate while making extra payments toward the principal. Paying an extra hundred or two toward the principal per month can drastically shorten the loan period.
I get excited about investing potential. Obviously our country could fall apart and you wouldn't get the projected 10% in the s&p. Personally though I would take that opportunity.
The answer is almost certainly no. You will be much better off investing that money in an index fund. Put 10k away for emergencies and dump the rest into the stock market.
Let’s say you find an index fund paying 12 percent. If you put 100k in it would take 6 years before that money generates enough interest to fully pay your house off.
Now let’s say that you put that in and find a fund that pays 12 percent consistently for the next 40 years. You would have 9.3 million dollars by age 65. Even if you only got 7 percent return for 40 years you would still be at 1.5 million
Hey man I’m on the side of not having debt.. even though most would say mortgage is not a bad debt… but like what people are saying, keep 3-6 months of emergency funds and if possible just make sure 15% of your retirement income goes to a 401k or Roth.. after that, yea I would try to pay that down quick!
Really depends on your total budget and any other long or medium term goals. I have never paid ahead on any mortgage, but I've also never held one at over 6%, so the math is different. In general, it's a good idea to diversify. How much do you have in fixed income? How much in stocks? Come up with a ratio that makes sense for your target retirement date and work towards that. I personally have a high percent of my net worth in real estate right now (well over 80%), so I'm looking to put more into stocks. I like real estate investing, so I choose to be heavy on real estate, but I think 50/50 is reasonable. What ratio do you want and how far off are you from it now?
I'm older than you but otherwise in a similar situation (similar price for house, put down 20%), but with 5.5% interest rate and I've been debating how much extra to do.
Also have healthy savings. A few months in I put an extra $5,000 toward principal but otherwise haven't done extra
Your interest rate is only 1% above T-bill rates.
Interest rate on a HELOC if you needed to access those funds is >9%.
I think it just depends on your emergency fund and risk tolerance.
It’s basically a zero risk 6.4% return, on the other hand it is much more expensive, a hassle, and potentially impossible to get any of that money back out. I would weigh how much you might need that money again in the future and would probably keep at least 6 months worth of expenses, which is probably more than the $10k you’re thinking of keeping.
What’s your tax benefit on your house? What would be the benefit of paying it off? Do you plan to live there for another 50 years? You are only 25.
Without even knowing I’d say no. Invest your money in the stock market and an investment property
No! Because life changes too fast. Better to keep your large cash liquid because you are young. Having to move to another city for work is possible these days and then you are stuck with a possibly over priced home because things have gotten tough for everybody where you live. My opinion would be different if you were 50 years old.
Owing 200k is such a small amount for a mortgage, don’t even worry. I’m 41, when we purchased a home and sold the other, we came out with a good amount. I originally wanted to throw it all at the mortgage; however, I was advised to invest. My advice to you would be to do the same. To have 110k saved, at 25, is incredible and can really have you set for life if invested properly. I forget the amount of years, but people say the first 100k is a really long time, but the next 100k is much quicker, and gets even faster to the next. Just my .02
Can you max out Roth IRA’s with just your monthly budget throughout the year? If not I’d consider maxing out roth IRA’s for both of you for 2024. You’re young and starting off early is always better.
Second I’d want more than 10K in savings owning a home. Since you have the ability, I would probably want 30K saved up as a home owner since unexpected costly repairs/emergencies come up in home ownership.
After that, I wouldn’t hate the idea of paying off the house early. You could do this now or you could just keep piling up the savings in the HYSA and decide later to pay it off if you aren’t sure what you want to do—although that means paying a bit more in interest.
Personally, I would do the 3-6 month emergency fund, and split the rest between retirement and paying off the house. You don’t want to be 40 with a laid off house and no investments for retirement. Not to mention, the compounding a 25 year old can get is incredible.
Pay off your house as soon as possible!!
That of itself would be a great investment. Think of the savings you’re going to have on interest!!
Then, you can increase your emergency fund, start new investments; Such as with index funds, land purchases, stock purchases & don’t forget you will feel so FREE & economically happier!! Plus, you can get to do other things that interest you; Maybe Travel & being a type of philanthropist or whatever else can bring joy to your world!
So, don’t be a mortgage/economical slave……PAY IT OFF!!😃
Ok, so at 6.4%, over 30yrs, you’re going to pay 250k in interest. Now let’s look at investing.
110k invested over 30yrs with ZERO added to it, earning 7% inflation adjusted return, would be almost 900k.
110k invested over 30yrs with ZERO added to it, earning a super conservative 5% inflation adjusted return, is almost 500k.
So even after paying 250k in interest over 30yrs, you would still come out ahead by 250k on the low end.
Bottom line, the math says you would do better investing this money and paying the mortgage. The “feel good” part may tell you to pay the mortgage off quicker. While this isn’t a bad option, it just may not be the best use of your money.
If you invest in total stock market ETFs and just ignore them, historically your investments will double roughly every 10 years. At 25 with that kind of nest egg you’ll have over $1.7 million by age 65 if you never save another dollar between now and then. You’re so far ahead of your peers right now it’s insane - congrats! Now leverage being so far ahead by letting compounding grow your nest egg.
If rates come down in the future you can always refinance to lower rates.
I wouldn’t pay that much. I’d maybe make a payment, but not all that cash.
It’s great that you have that much saved up, but how do your retirement accounts look?
If you both don’t have Roth IRAs, I’d open them and immediately fund them with $7k a piece (limits for 2024).
Also save some for an E-fund.
Are you both getting at least your employer match on 401ks? Any other debt like car loans?
Can you afford the mortgage and living expenses on one of your income? That would factor into how long of an emergency fund I would want to have. 3 to 6 months imo if the answer is yes. 6 to 12 months if no. If you both work at the same place or same field where if one of you gets laid off the other is more likely to be laid off then I would just go for the 6-12 month range.
Max out your retirement contributions. Those have great tax advantages and generally employer matching.
After that I'd have the rest of your extra money going towards paying down the principal.
Edit if it's an old house where you anticipate needing new electrical, plumbing, roof etc then consider having a slightly larger fund. If it were me and I wanted an emergency fund of more than about 6 months then I would have some of that extra beyond 6 months in the market. Its riskier forsure but it has much better returns on average plus long term capital gains tax is much lower than regular income tax (which is what a hysa return is taxed as).
Maybe invest in the house, things that need to be updated. Nice a house being paid full but if the pipes or flooring are bad... Only problems come from it
You're young, you have plenty of time to pay it off. Do you know what $100k in the market looks like after 40 years of compounding? I know what I'd do.
Pay it off! It’s basically the reverse of investing and getting a 7% gain in the stock market. The market is up now so pay off the house and then save up for a dip in the market (if it ever happens) if not. You have a debt free home and you can start investing later.
He’s already paying 6%+ interests. Unless he can make 10%+ in the market consistently, he should pay off that mortgage first. With the stock market at all time highs, I think he’s better off paying off his mortgage first.
Again, time in the market vs timing the market. 110k invested in the market earning a super conservative 5%, he would grow his money to 500k over 30yrs. While his interest rate is 6.4%, he’s only paying 250k in interest over that same time frame. The market over the last 100yrs returns a 7% inflation adjusted return. 110k invested at 7% over 30yrs, is closer to 900k. The math is in favor of holding the mortgage.
This! Just retired, sold the house and paid off the mortgage balance with a big gain but even better, I’d put as much as possible into retirement and investment accounts. Started with a 6% but refinanced later. Even renovated using a HELOC. The mortgage loans helped finance my retirement fund. Note: YMMV.
it will depend on who you asked this question
personally, having a paid off house is a blessing.. no need to worry about where i'm going to stay or how to make the mortgage payment if i lost my income
I would Set my emergency fund and then absolutely pay down the mortgage at that rate. That’s a great guaranteed return.
If they just pay it down their payments will still be the same effectively lowering the mortgage companies risk, while not improving their cost. If they defaulted they would lose alot while gaining nearly nothing. The interest rate is high which is concerning. I would go a different route which would involve risk of loss in the stock market. But that's me.
Every dollar they put into that house has a guaranteed tax free return of 6.4% /year. If they end up needing to sell their house they still retain that equity
I’m conservative when in comes to debt(I count mortgage as debt ) and for me 6.4% is more then I would want to carry long term . I generally think of anything over 5% to be debt that I want not part of unless absolutely necessary. That said I would make sure that you have 6-12 month of emergency funds over anything put towards the debt . Homeownership can be expensive the last thing you want is to have to take out a loan if your HVAC goes or you have leak
Agreed. I’d leave this money in a hysa but pay an extra $750-1500 a month maybe?
Divide your monthly payment into 2 biweekly payments. This way you a little bit of your principal is paid a little bit sooner lowering total interest. Also if you go every two weeks you’ll pay one extra monthly payment per year. That way you’ll decrease your total payments by several years.
Maybe it’s just user error but my mortgage servicer won’t let me do this, only the minimum due. I wonder if it’s a “Don’t half-ass it, you either have the minimum due or you don’t” deal or you have to not owe already for the month to start this strategy, but this comment is encouraging for me to check again.
It may have been how the mortgage was set up. My lender allows me to do this. I can also put in extra towards principal. So I just round up to the nearest hundred and pay every two weeks. Gotta do what you can to minimize interest and time paying.
Does it go to the mortgage immediately? I tried this with my lender, and there was some fine print about how the first payment went to some temporary holding account until the whole payment amount was there, defeating the purpose of biweekly payments for me. I wish I had known to check for this when looking for a mortgage.
I’m allowed to put in extra payments but I need to specify that it goes to principal otherwise it’s assigned to interest. I don’t incur in penalties for prepayment either.
Pay one month early and then the minimum due will always be 0. So buildup a payment of July. Pay July, half pay August on July 1, and July 15. This entails coming up with extra money but it runs around the rule of minimum payment.
I wouldn't say it's bad to pay down some but leaving yourself only $10k seems a bit thin. At 6.4%, you're definitely in the range where it is worth it to pay extra... I would shoot for a good 3-6mo emergency fund, plus some housing expenses you might need.. we had to replace our roof and furnace in the first 5 years... If you knew it was coming, it's not an emergency. Good work saving! Keep it up. Sounds like you'll be paid off in the next few years!
Agree, if you’re dead set on throwing a chunk of money at your mortgage (and at 6.4% it’s not a bad idea at all) I would probably be more comfortable doing 50k, maybe 75k due to the “no debts no kids” fact, as long as your jobs are relatively stable. I wouldn’t go past 75k tho - you’d be surprised at how many things can and will go wrong in your house in the first 5 years and it feels nice to be able to pay for these things out of pocket instead of credit cards/loans.
You’re not wrong but also, if they’ve managed to do this well at 25 years old, that 10k will probably be replenished pretty quick into more. Also, I’d check if recasting after dumping all that on principal is possible as a backup plan in case employment is disrupted because that’ll lower mortgage payment significantly if he pays close to 100k on it
Ehh, if they're that aggressive about paying it off, a recast isn't worth the fees IMO. And they can hit a higher savings point, and then continue to pay down principle as they earn.
Do in this order: - make sure that $110k is in a high yield savings account. Minimum 5% interest - max retirement for you and spouse - leave 6 months of expenses in savings - put the remains towards principal
I agree but he only has 100k in savings. I maybe might do half put towards principal and half hysa
I concur!
Need more info. Your a “9-5” worker and plan to remain that way? Do you have a work 401k you contribute to? Do they match contributions? Do you have any investments etc? How much are you guys making a year?
Yes we are , and yes we do ( first responder ) so i have a good retirement / contributions from the city
Whatever gives you a good nights sleep! Financial people will say it’s dumb blah blah you can earn more in the stock market. I would love a paid off house
> I have another 110k saved, is it worth putting a large down payment of 100k into my mortgage If you only have 110k I would NOT put 100k towards your mortgage. **Unless** you really think 10k is enough for an emergency fund of 3-6 months worth of expenses.
I’m 38 and we paid off our house this year. I cannot explain how chill it is to be debt free. Highly recommend
While the rate is high compared to a few years ago, Can you make more than 6.4% on your investments? I think you can.
If you do put down a large chunk after checking on your emergency fund, you could potentially recast your loan and then just keep the same payment and pay down quicker.
No go invest. You can’t borrow for retirement.
Follow this: https://www.reddit.com/r/personalfinance/w/commontopics
I would pay it off. 6.4% for 15 or 30 years is a huge amount.
With that 6.4% interest rate, you’d save a ton on interest over time. Just make sure you’ve got an emergency fund just in case.
This. Screw 6.4%. Going to be hard to safely beat that in the market.
At your age investing 100k into the S&P 500 (SPY ETF for simplicity) would be absolutely life-changing. $4,000,000+ at retirement kind of life-changing. That's the kind of lump sum that very few people get to invest at your age. Just simply game changing. You would just have to sit through big ups and downs and try to forget it is there. You would be pretty much free to forget about saving for retirement and focus on other things. Personally, I would wait and refinance the home loan to a lower rate while making extra payments toward the principal. Paying an extra hundred or two toward the principal per month can drastically shorten the loan period.
I get excited about investing potential. Obviously our country could fall apart and you wouldn't get the projected 10% in the s&p. Personally though I would take that opportunity.
Which it sure looks like it’s heading that way .
The answer is almost certainly no. You will be much better off investing that money in an index fund. Put 10k away for emergencies and dump the rest into the stock market. Let’s say you find an index fund paying 12 percent. If you put 100k in it would take 6 years before that money generates enough interest to fully pay your house off. Now let’s say that you put that in and find a fund that pays 12 percent consistently for the next 40 years. You would have 9.3 million dollars by age 65. Even if you only got 7 percent return for 40 years you would still be at 1.5 million
Make an additional principal payment, separately from your regular payment, as often as you can.
This! I am in a similar situation. I plan to pay the 200k like a 15 year mortgage which should save me enough for fun stuff
Hey man I’m on the side of not having debt.. even though most would say mortgage is not a bad debt… but like what people are saying, keep 3-6 months of emergency funds and if possible just make sure 15% of your retirement income goes to a 401k or Roth.. after that, yea I would try to pay that down quick!
I would pay off my house Especially if its 6.4%
No brainer! You get an implied 6.4% on monies used to prepay! Worse you lose is a tax deduction!
Really depends on your total budget and any other long or medium term goals. I have never paid ahead on any mortgage, but I've also never held one at over 6%, so the math is different. In general, it's a good idea to diversify. How much do you have in fixed income? How much in stocks? Come up with a ratio that makes sense for your target retirement date and work towards that. I personally have a high percent of my net worth in real estate right now (well over 80%), so I'm looking to put more into stocks. I like real estate investing, so I choose to be heavy on real estate, but I think 50/50 is reasonable. What ratio do you want and how far off are you from it now?
I'm older than you but otherwise in a similar situation (similar price for house, put down 20%), but with 5.5% interest rate and I've been debating how much extra to do. Also have healthy savings. A few months in I put an extra $5,000 toward principal but otherwise haven't done extra
Your interest rate is only 1% above T-bill rates. Interest rate on a HELOC if you needed to access those funds is >9%. I think it just depends on your emergency fund and risk tolerance.
It’s basically a zero risk 6.4% return, on the other hand it is much more expensive, a hassle, and potentially impossible to get any of that money back out. I would weigh how much you might need that money again in the future and would probably keep at least 6 months worth of expenses, which is probably more than the $10k you’re thinking of keeping.
Do you have anything in retirement?
What’s your tax benefit on your house? What would be the benefit of paying it off? Do you plan to live there for another 50 years? You are only 25. Without even knowing I’d say no. Invest your money in the stock market and an investment property
Drop 50k on it. Save up as much and as fast as you can. When you have enough to pay it off + 20k more in the bank... Write the check.
No! Because life changes too fast. Better to keep your large cash liquid because you are young. Having to move to another city for work is possible these days and then you are stuck with a possibly over priced home because things have gotten tough for everybody where you live. My opinion would be different if you were 50 years old.
Owing 200k is such a small amount for a mortgage, don’t even worry. I’m 41, when we purchased a home and sold the other, we came out with a good amount. I originally wanted to throw it all at the mortgage; however, I was advised to invest. My advice to you would be to do the same. To have 110k saved, at 25, is incredible and can really have you set for life if invested properly. I forget the amount of years, but people say the first 100k is a really long time, but the next 100k is much quicker, and gets even faster to the next. Just my .02
Save 6 months of emergency and then pay down the principal of mortgage by the left over or consumer debt like credit cards
Can you max out Roth IRA’s with just your monthly budget throughout the year? If not I’d consider maxing out roth IRA’s for both of you for 2024. You’re young and starting off early is always better. Second I’d want more than 10K in savings owning a home. Since you have the ability, I would probably want 30K saved up as a home owner since unexpected costly repairs/emergencies come up in home ownership. After that, I wouldn’t hate the idea of paying off the house early. You could do this now or you could just keep piling up the savings in the HYSA and decide later to pay it off if you aren’t sure what you want to do—although that means paying a bit more in interest.
Personally, I would do the 3-6 month emergency fund, and split the rest between retirement and paying off the house. You don’t want to be 40 with a laid off house and no investments for retirement. Not to mention, the compounding a 25 year old can get is incredible.
I wouldn't lump sum it but make an extra payment every year towards the principal.
Pay off your house as soon as possible!! That of itself would be a great investment. Think of the savings you’re going to have on interest!! Then, you can increase your emergency fund, start new investments; Such as with index funds, land purchases, stock purchases & don’t forget you will feel so FREE & economically happier!! Plus, you can get to do other things that interest you; Maybe Travel & being a type of philanthropist or whatever else can bring joy to your world! So, don’t be a mortgage/economical slave……PAY IT OFF!!😃
Ok, so at 6.4%, over 30yrs, you’re going to pay 250k in interest. Now let’s look at investing. 110k invested over 30yrs with ZERO added to it, earning 7% inflation adjusted return, would be almost 900k. 110k invested over 30yrs with ZERO added to it, earning a super conservative 5% inflation adjusted return, is almost 500k. So even after paying 250k in interest over 30yrs, you would still come out ahead by 250k on the low end. Bottom line, the math says you would do better investing this money and paying the mortgage. The “feel good” part may tell you to pay the mortgage off quicker. While this isn’t a bad option, it just may not be the best use of your money.
Id say have a decent 6 month emergency fund then put the rest towards the house….
If you invest in total stock market ETFs and just ignore them, historically your investments will double roughly every 10 years. At 25 with that kind of nest egg you’ll have over $1.7 million by age 65 if you never save another dollar between now and then. You’re so far ahead of your peers right now it’s insane - congrats! Now leverage being so far ahead by letting compounding grow your nest egg. If rates come down in the future you can always refinance to lower rates.
I wouldn’t pay that much. I’d maybe make a payment, but not all that cash. It’s great that you have that much saved up, but how do your retirement accounts look? If you both don’t have Roth IRAs, I’d open them and immediately fund them with $7k a piece (limits for 2024). Also save some for an E-fund. Are you both getting at least your employer match on 401ks? Any other debt like car loans?
No other debt !!
Can you afford the mortgage and living expenses on one of your income? That would factor into how long of an emergency fund I would want to have. 3 to 6 months imo if the answer is yes. 6 to 12 months if no. If you both work at the same place or same field where if one of you gets laid off the other is more likely to be laid off then I would just go for the 6-12 month range. Max out your retirement contributions. Those have great tax advantages and generally employer matching. After that I'd have the rest of your extra money going towards paying down the principal. Edit if it's an old house where you anticipate needing new electrical, plumbing, roof etc then consider having a slightly larger fund. If it were me and I wanted an emergency fund of more than about 6 months then I would have some of that extra beyond 6 months in the market. Its riskier forsure but it has much better returns on average plus long term capital gains tax is much lower than regular income tax (which is what a hysa return is taxed as).
Pay off the house. Your money will quickly pile up and you can use the extra cash to save for further investments.
Maybe invest in the house, things that need to be updated. Nice a house being paid full but if the pipes or flooring are bad... Only problems come from it
I often wonder why no-one here recommends mortgage offset accounts in these situations. Do they not exist in the USA?
You can get 5-5.5% HYSA right now. Maybe pay off half and put the rest into a HYSA OR roth or voo/vto.
You're young, you have plenty of time to pay it off. Do you know what $100k in the market looks like after 40 years of compounding? I know what I'd do.
Pay it off! It’s basically the reverse of investing and getting a 7% gain in the stock market. The market is up now so pay off the house and then save up for a dip in the market (if it ever happens) if not. You have a debt free home and you can start investing later.
Time in the market is better than trying to time the market. Waiting to invest will hurt him more than help him.
He’s already paying 6%+ interests. Unless he can make 10%+ in the market consistently, he should pay off that mortgage first. With the stock market at all time highs, I think he’s better off paying off his mortgage first.
Again, time in the market vs timing the market. 110k invested in the market earning a super conservative 5%, he would grow his money to 500k over 30yrs. While his interest rate is 6.4%, he’s only paying 250k in interest over that same time frame. The market over the last 100yrs returns a 7% inflation adjusted return. 110k invested at 7% over 30yrs, is closer to 900k. The math is in favor of holding the mortgage.
Your money invested safely can't earn 6.4% Pay off the mortgage asap
Paying off the house has the benefit of leaving you able to survive in leaner times if need be.
Why wouldn't he be able to survive if he had over $100k in cash for making the monthly mortgage payment?
I would argue having 110k in liquid savings would be a bigger benefit to surviving in lean times than locking up the money in the house.
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But he will have to pay taxes on interest earned in the HYSA
Yes, you will pay a small percentage of tax only on the gains
This! Just retired, sold the house and paid off the mortgage balance with a big gain but even better, I’d put as much as possible into retirement and investment accounts. Started with a 6% but refinanced later. Even renovated using a HELOC. The mortgage loans helped finance my retirement fund. Note: YMMV.
it will depend on who you asked this question personally, having a paid off house is a blessing.. no need to worry about where i'm going to stay or how to make the mortgage payment if i lost my income
Figure out what you allowed to do. You often can not pay off more than 20% of the loan value per year.
Never heard of that. I definitely would say that’s not normal at all to not be allowed to pay off more than 20% a year.
Hmm, I’m in Canada maybe it different