Should I pay off my house?

[cardboardbox]

I have enough money to pay off the rest of my mortgage but I'm aware many people will advise against that if the interest rate is low enough. My rate is 3.42% and right now the pay off money is in a savings account at 1.75%. Should I invest in something or pay off my mortgage? No monthly house payment would feel really nice!

[DMT]

How much longer if you stick to your original payment schedule? When you factor in mortgage interest tax credit , it's generally not in your best interest to pay it off.

[DMT]

Where are you getting 1.75%?

[cardboardbox]

How much longer if you stick to your original payment schedule? When you factor in mortgage interest tax credit , it's generally not in your best interest to pay it off.

I pay way more than required, almost double, so not sure how much longer. I refinanced in 2012, 30 years, and I'd bet the way I pay it would be 15-20 years total so maybe 9-14 years left. I figured under the new tax system I would be taking the standard deduction so I'd no longer get the interest tax credit.

[cardboardbox]

Where are you getting 1.75%?

Discover

[DMT]

I pay way more than required, almost double, so not sure how much longer. I refinanced in 2012, 30 years, and I'd bet the way I pay it would be 15-20 years total so maybe 9-14 years left. I figured under the new tax system I would be taking the standard deduction so I'd no longer get the interest tax credit.

Yea, I'd probably talk to a financial advisor.

[DMT]

Discover

Yea I see some at 1.85%...my "high-interest" account is paying a whopping 1%, time to switch.

[revo]

Yea, I'd probably talk to a financial advisor.

At your service.

I tell all my clients NOT to pay off their house with their savings. I understand that it "feels good" but:
1) you completely lose your liquidity;
2) real estate has obviously proven to be a more unstable investment than anyone realized;
3) cash is king;
4) and as you said, you can now get higher interest from just savings accounts now (you can now get almost 2.00% in many places) and interest rates are still rising.

Keep doing what you're doing, pay a little bit more every month.

[cardboardbox]

At your service.

I tell all my clients NOT to pay off their house with their savings. I understand that it "feels good" but:
1) you completely lose your liquidity;
2) real estate has obviously proven to be a more unstable investment than anyone realized;
3) cash is king;
4) and as you said, you can now get higher interest from just savings accounts now (you can now get almost 2.00% in many places) and interest rates are still rising.

Keep doing what you're doing, pay a little bit more every month.

but I hate seeing the interest I pay on every bill. I'm throwing a lot of money away every month.

So the way I'm supposed to look at it is 3.42 - 1.75 (savings) = 1.67% I'm paying to keep my liquidity?

[revo]

but I hate seeing the interest I pay on every bill. I throwing a lot of money away every month.

So the way I'm supposed to look at it is 3.42 - 1.75 (savings) = 1.67% I'm paying to keep my liquidity?

You could. Is this money you can invest? If so, you may be able to get a far higher return than just 1.75% (but of course, any investment has risk). If you don't want to take ANY risk and have a 5-year timeline, how about a CD? You can get 3.00% on a 5-year CD. Problem with CDs is you lock in the rate, and obviously rates will rise soon enough.

[cardboardbox]

You could. Is this money you can invest? If so, you may be able to get a far higher return than just 1.75% (but of course, any investment has risk). If you don't want to take ANY risk and have a 5-year timeline, how about a CD? You can get 3.00% on a 5-year CD. Problem with CDs is you lock in the rate, and obviously rates will rise soon enough.

Yes I could invest but that would sort of reduce my liquidity, right? If the CD is a lower interest rate than my mortgage, wouldn't I be better off putting that money into paying off my mortgage?

I don't mind some risk. I wish I had bought amazon when you did!

[revo]

Yes I could invest but that would sort of reduce my liquidity, right? If the CD is a lower interest rate than my mortgage, wouldn't I be better off putting that money into paying off my mortgage?

I don't mind some risk. I wish I had bought amazon when you did!

Yes, a CD would reduce your liquidity, but I'm still of the camp that if you reduce your debt there, you'll only create more debt someplace else, hence the steady payments, but of a greater amount.

Ever since the '08-'09 housing crisis, I'm just not in favor of using your savings to pay down a mortgage. Plus, the housing payment never really goes away since you'll be paying RE taxes and homeowner's insurance. Around here, that's still significant!

Have you used any online mortgage calculators to determine how many years you'd shave off if you add money every month?

[cardboardbox]

Have you used any online mortgage calculators to determine how many years you'd shave off if you add money every month?

I've always paid extra each month. In the beginning it was just a little but since the refinance in Dec 2012 I paid 60% extra and recently I've bumped that up to 78% extra. Maybe I should pay less on my house and get a rental property with the extra money I'm paying each month. I've long thought about getting into rentals but I always thought I'd pay off my own house first.

[revo]

I've always paid extra each month. In the beginning it was just a little but since the refinance in Dec 2012 I paid 60% extra and recently I've bumped that up to 78% extra. Maybe I should pay less on my house and get a rental property with the extra money I'm paying each month. I've long thought about getting into rentals but I always thought I'd pay off my own house first.

Now you're talking my language. I own three rental properties (7 rentable apartments). We bought them in '03 but refi'd them into 15 year mortgages and only have 9 years left. Now I wouldn't mind paying those off sooner because of the high income they would throw off, but we're doing the same as you to a much smaller extent (a couple of hundred extra every month).

Have you ever been a landlord? It's a fantastic retirement plan, but being a landlord isn't for everyone!

[B-Fly]

We've invested through a financial advisor (a portfolio of domestic and global mutual funds and domestic and foreign bonds) rather than paying off the mortgage or leaving substantial sums in savings accounts. We've also tried to maximize our contributions to employer-offered 403(b) plans. All generally should do better for you than paying off your mortgage early.