[USER]

My previous house is on the market and when it sells we’ll have a large sum of money. It is enough with put some from our HYSA to pay off our mortgage on our new house (this is the house we plan to retire in).

I could obviously take this money and invest it as well. We have minimal stock investments, but a strong real estate portfolio, retirement is set, and kids college is set as well.

My wife wants to pay off the primary home for peace of mind but we are still young (with little kids) and I think investing the money now so that it can grow is a better option.

Our interest rate is 6.25% and so much of our money goes to interest.

Part of why I don’t want to pay it off with this money is because I think interest rates will level out. Maybe not 2-3% but at least 4-5% and we could just refinance and make excellerated payments and pay it off in 10yrs or so.

We also have about $50k in remodeling left to do in the new house that is important to making our lives easier and the house work better for our family, but not an absolute need so it could wait if needed.

Paying it off now means we would have 75% of our W2 income leftover every month after paying bills (this doesn’t include the real estate income).

She thinks we could take that left over money and invest it and grow more stocks over time.

Any thoughts on this? Ideas? Alternatively options?

[Rochelle]

There’s definitely a peace of mind for paying off the house, especially with that interest rate.

However, if you want to compromise then consider making large extra FOR PRINCIPAL ONLY payments each month, which will help pay off your house faster.

This will still leave you with money to remodel your home. Maybe your wife wants to pay off the house so she can stay home with your kids??

As far as investing goes, hopefully you are able to fully fund both of your ROTH IRA’s each year (or backdoor ROTH or ROTH conversions).

Instead of stocks, consider investing in dividend paying ETF’s (for diversification) which mimics the S&P 500.

[Karl]

I would go with your wife’s plan. Use the extra monthly income to fund renovations, fun vacations, new exciting investing goals, etc.

[Jeremy]

Rates aren’t coming down unless things get bad and they need to pump. Rates being too low causes bidding wars.

But if they do you can always take out a mortgage again if you really want one.

[Mandi]

Can you meet in the middle? Take a chunk and do a rebalance on the house to lower the monthly payment, but keep a portion for investing and your plan for if rates come down a little.

Like you said the 3% days I don’t see coming back, but when rates are around that 4.5-5.5% is a good balance to both sides.

Those borrowing money and those who have money saved (essentially lending it) to get higher rate on return.

[Pam]

Just something to consider is your mortgage interest deduction. You may want to verify you’re not on the cusp of the next tax bracket and that losing that deduction won’t kick you into a higher tax and you end up losing money.

May be a non-issue but worth considering.

[Amanda]

I agree with your wife. That will free up a lot of money to invest each month in place of a mortgage payment.

Especially since you put college and retirement are set.

[Kristin]

I would pay off. It forces dollar cost averaging for additional investments. Making those investments and seeing it grow regularly can be very motivating.

If you want to do home improvements, keep that money out.

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