Comments on: Classic Debate: Should You Pay Off Your Mortgage or Invest That Extra Money?

By: There Is No Secret to Financial Success

There Is No Secret to Financial Success — Sat, 31 Dec 2011 21:31:29 +0000

[...] dollar you have and put it into your portfolio. You’re winning by 5.5% every time you do that rather than paying off your mortgage.However, under normal circumstances, interest is bad. You’re paying extra money on top of the [...]

By: Weekly Favorites and Gratitude! «Budgeting In the Fun Stuff

Weekly Favorites and Gratitude! «Budgeting In the Fun Stuff — Sat, 17 Jul 2010 11:02:11 +0000

[...] Debt Plan with Classic Debate: Should You Pay Off Your Mortgage or Invest That Extra Money? What side do you land on? I split the difference and do [...]

By: Budgeting in the Fun Stuff

Budgeting in the Fun Stuff — Wed, 14 Jul 2010 19:00:18 +0000

I’m with Golfing Girl. We got a 15 year mortgage at 5.375%, which boiled down to $740 a month. We’ve paid $900 a month since the beginning and also hit all of our other savings goals (including a 401(k), Roth IRA, and $2500 annually to pure high dividend stock investments) before throwing any extra towards debt. We almost have our last car loan ever paid off…happens at the end of the month…then we can put that extra towards the house. We’re currently on track to have our mortgage paid off in 11.33 years total, but after the car is paid off, it will probably be more like 9-10 years total. WOOT!

By: Golfing Girl

Golfing Girl — Sat, 03 Jul 2010 19:04:22 +0000

“you would be losing anywhere from 7 to 9% on every dollar that you use to pay down your mortgage”
Check your numbers–you have to subtract out the interest you’re paying in the mortgage (minus the standard deduction for interest on your taxes). That will be a lot less than 7 to 9%. In our case, we pay 5.5% in interest so that number is now down to 1.5% to 3.5% (minus tax deduction). The risk isn’t worth it for a POSSIBLE 1.5% return to me. I’d rather have the FREEDOM of no debts, a guaranteed return of 5.5% and a much lower emergency fund if a mortgage payment weren’t needed.
That being said, we opted for a 15 year mortgage (saved us $90K in interest over the 30 year rate we were offered) and are paying an extra $100 per month even though I’m now staying at home with our second child. However, we have a full 6 months in our emergency fund and are still contributing 25% to retirement, otherwise we wouldn’t be putting extra money into the mortgage. Half of any windfalls usually end up in the mortgage as well.
I know this scenario isn’t realistic for most people, as they buy at the top of their price range for homes. This is a real issue–people are just not willing to “settle” for something in the middle or lower end of their price range.

By: Loan One Lender

Loan One Lender — Fri, 02 Jul 2010 16:49:05 +0000

You asked some good questions in this article. You’re right that it’s not an easy black-and-white answer to tell someone whether it is best to pay off a mortgage or invest their money in the stock market. I’m glad that you tell people to take into consideration their interest rate, risk tolerance, and other factors. It may be wise to advise people with these financial questions to meet with a financial planner, although he or she may be biased too!