[USER]

Need thoughts on paying off mortgage. I keep going back and forth. I am 42, married with 2 kids and thinking about another. I have 26 years left on my mortgage at 2.625 interest rate.

I still owe $309k. I have about 530k in high yield savings and CDS at 4.5%, 4.75% and 5.5%.

I have 800k in retirement investments and 200k of equity in the home. I personally don’t want all my money in the stock market.

I prefer to have 1/4 to 1/3 in more safe places. I have the cash to pay off the house but I’m earning more in interest in CDS than the mortgage interest.

We like to travel and use some of the interest to pay for our trips. What do you all think?

[Ricky]

2.625% equals NO. Almost a free loan. You have answered your questions with your own details.

In short, NO!!

[Brad]

I just paid off mine. Went from a 3.6 interest rate to 0% and no mortgage payment. My stress level has dropped 100% I’m now planning my roadtrip.

I’m only stressing about what beach to travel to first!!!!

Toes in the water, ass in the sand.

[Ben]

I wouldnt pay it off. You make more interest and have better liquidity. If rates drop maybe.

[Grantly]

It’s such a personal decision honestly.
I’m 46, we paid off our mortgage when I was 39. It required considerable sacrifice.

We had just paid off $80K of student loans- so we were already throwing everything at debt for 4 years as it was.

All I can say is we don’t regret it, and it’s probably allowed us to save a higher percentage of our income for our retirement and our child’s education- 2 of our most important financial goals.

[Bethany]

You’re a very very conservative investor for as young as you are! Any particular reason?

I can’t speak for what you should do, but I’m not going to pay off a 3 percent mortgage when the average return of an index fund is 10.7 percent.

BUT if you have lower risk tolerance and it will bring you safe and help you sleep better at night, that’s a valid reason to pay it off.

You may look into treasuries — they are safe and they’ll even have a higher return than 3 percent.

[Chet]

that you are alluding to your risk tolerance with the huge amount of CD’s you list, I am guessing that security is important to you.

There is no better feeling than having that paid for house.

In addition, if you keep the mortgage to term, you would be 68 years old. Paying off the mortgage would go a long way to lowering your FI # and your RE age.

I would recommend that you keep your CD’s and continue to use the interest for your fun.

Keep putting 15% in retirement investing and then take all of your extra money and put it on the mortgage.

It doesn’t need to be “beans and rice” lifestyle for you, but some level of focus and intensity would be good.

[Michael]

If you just buy US treasuries in the same amount and duration as your existing mortgage, you would be gaining a net 2% above your mortgage interest rate on the balance.

No reason at all to pay that mortgage off with such a good rate and the arbitrage opportunity you can lock in.

[Darnell]

You have a great mortgage rate and interest on savings but there is a different level of peace and security without a mortgage.

I would use the interest payments to pay extra on the principal balance

[Kevin]

I am 41 years old and I had a 3% mortgage and I paid it off in March of this year. I don’t care what it cost me I’ll still be ok.

For some people it doesn’t make sense and I get that but it’s not a math problem.

It’s up to the individual and I can tell you this (for me personally) I am happier and have zero regrets at all paying off a 3% mortgage this year.

The peace of mind I have knowing no matter what I have a paid for home is worth more than any numbers on a spreadsheet for me.

[Andrew]

No way I would pay that off. Not with that low interest rate. Also, given current market/economic conditions, I’d much rather have access to my money, especially as it can safely currently earn more than your mortgage interest rate.

[Diane]

I get wanting to pay it off, but how about doing a recast with 150k? My bank charges $150 to do this. It will give you some peace of mind and keep a small mortgage at the rate you have is a great deal.

I owe about 40k on my house after a 15 year mortgage. My house is worth 1.3 million….

I am stressing about not having that money to invest.

It’s nice to have my mortgage mostly paid off, but if I stay in my house another 20 years…how much more could I have made with the equity in index funds or the stock market?

[Tanjib]

If I were in your shoes, I would not pay off the house at 2.6% interest.

Use the interest you are earning on the cash and pay extra towards the mortgage.

[Andre]

I would pay off the house ASAP. Nothing beats the peace of mind of being mortgage-free.

For me it’s worth way more than the extra couple of points you can make by not paying it off.

You reduce your risk, your stress level and can concentrate on building wealth.

[Shaun]

No. One thing not mentioned yet is if that’s an assumable mortgage, it’s an asset.

You would get a premium on the price of your house if you decided to sell.

[Helson]

There’s comfort in no debt.
But the interest rate is so low that it’s below inflation and even a high yield savings account can offer more returns.

Compounding interest to increase your retirement to whatever is your FI number is easiest when younger and with more years.

If it’s easier to have a time line you can pay biweekly or just add a couple hundred to your current payment and leave money in your high yield savings that you could use to pay it off if you get to the point of deciding against debt.

[Author]

Posts