UnderGround Forums
 

OtherGround Forums >> Finance Q: Use lump sum to pay down mtg or invest?


12/10/13 4:15 PM
Ignore | Quote | Vote Down | Vote Up
Eh_J
49 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 3/26/09
Posts: 3508
 
I have about 30 k in savings. I owe about 150 k on my mortgage.

I have an option to throw the 30 k into my mortgage before the end of the year.

I was considering investing it short term and throwing the money in at a later date.

Wat do?
12/10/13 4:27 PM
Ignore | Quote | Vote Down | Vote Up
cheesesteak
238 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 11/23/02
Posts: 8202
If the investment is something that will bring back sizeable returns which in turn can be invested to bring in more sizable returns. i'd go with the investing. YOu can always payoff your mortgage later if you make big money of these investments, plus from a tax standpoint writing of the mortgage can be helpful. You might want to consult your accountant for what the best decision is though as I don't know what your entire financial picture looks like.
12/10/13 4:29 PM
Ignore | Quote | Vote Down | Vote Up
TheCrow13
78 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 9/24/11
Posts: 1886
I know nothing.

But I do know that debt is there until you take it off.

Are you a person who takes risks, or do you like to play it safe?

Personally, id rather pay off my debt now and invest my future money. Phone Post 3.0
12/10/13 4:34 PM
Ignore | Quote | Vote Down | Vote Up
fanat
Send Private Message Add Comment To Profile

Member Since: 6/6/02
Posts: 10902
Don't forget that you will pay taxes on profits from your investments.

I doubt it will be worth more that just paying off your mortgage.

So, in short, pay off your mortgage!
12/10/13 4:37 PM
Ignore | Quote | Vote Down | Vote Up
cruedi
78 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 1/1/01
Posts: 5134
what's your mortgage rate? It's it's very low ie 4% fixed I'd invest the money. If you have a higher rate I'd try to refinance and you could put some of that money toward is it and keep some for a rainy day.
12/10/13 4:40 PM
Ignore | Quote | Vote Down | Vote Up
nobadanymore
162 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 6/17/11
Posts: 6867
fanat - Don't forget that you will pay taxes on profits from your investments.

I doubt it will be worth more that just paying off your mortgage.

So, in short, pay off your mortgage!
This. I don't think Investing short term is generally a good idea, too risky, imo. I think I'd keep a few months expenses and put the rest into the mortgage.

Hopefully someone with better knowledge will chime in and let us know the best thing to do in this situation. Phone Post 3.0
12/10/13 4:40 PM
Ignore | Quote | Vote Down | Vote Up
Wes_Mantooth
Send Private Message Add Comment To Profile

Member Since: 10/2/09
Posts: 13087
TheCrow13 - I know nothing.

But I do know that debt is there until you take it off.

Are you a person who takes risks, or do you like to play it safe?

Personally, id rather pay off my debt now and invest my future money. Phone Post 3.0

Pretty decent advice.

I paid down my mortgage pretty quickly. I don't like debt.

The peace of mind you will get by paying down your mortgage is incredible.

The other option is to put half towards your mortgage and half to investing.
12/10/13 5:12 PM
Ignore | Quote | Vote Down | Vote Up
icedog11
76 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 6/9/05
Posts: 8382
Gladiator Mouthguards, president/principle

refi the the house add the 30 k to reduce the loan amount and refi for 10 years

12/10/13 5:45 PM
Ignore | Quote | Vote Down | Vote Up
Iamtheonepercent
33 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 2/11/12
Posts: 1186
If you didn't have the 30,000 but only owed 120,000. Would you borrow the 30,000 making your mortgage 150,000 to invest? Phone Post 3.0
12/10/13 5:47 PM
Ignore | Quote | Vote Down | Vote Up
crs1
4 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 1/1/01
Posts: 14
Dont tie it up in mortgage. Invest but keep it as liquid as possible. Research the terms bank arbitrage. It's how most banks make money. They give you a cd for 2% and then take that money loan it to someone else for an auto loan at 6%. Mortgage money is the cheapest around plus you can write off the interest. I know too many people who took a big hit when they had a shit ton of equity in their home, income decreased, didnt qualify to refi and good luck on selling it if the market is slow. Phone Post 3.0
12/10/13 5:49 PM
Ignore | Quote | Vote Down | Vote Up
Pugilist82
64 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 10/31/05
Posts: 3857
If you were able to pay off your mortgage completely, despite what financial experts say, I would pay it off. Considering you cannot pay it off anyway, I would try to invest it and use the capitol gained to help pay it off in the future.
12/10/13 6:10 PM
Ignore | Quote | Vote Down | Vote Up
slo ko
887 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 5/4/03
Posts: 19101
If the interest rate on your investment is higher than the interest rate on your mortgage - invest. Phone Post 3.0
12/10/13 6:12 PM
Ignore | Quote | Vote Down | Vote Up
jake11
Send Private Message Add Comment To Profile

Member Since: 8/12/09
Posts: 6583
do you have any other debt?
Car loan, credit cards, school loan etc....
If so, could you wipe any of those out?

the way I go about it, I pay off whatever debt has the most interest. If you can invest in something that will for sure pay you more in interest than any of your current debt takes from you in interest than go for the investment. I'm willing to bet that you have no such investment so use it to pay off debt.
Or like someone said, use it to refi at a better rate if possible.
12/10/13 6:41 PM
Ignore | Quote | Vote Down | Vote Up
Eh_J
49 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 3/26/09
Posts: 3509
I'm completely debt free aside from the mortgage. I make about $110 000 per year before taxes. When I bought my place 5 years ago I was earning 40 k and had barely any money for a down payment. I've changed my payments to the maximum allowable but I can't put more than $1083 into it per month based on the original terms.

Here are the mortgage details:

Original Mortgage Amount $242,402.50
Mortgage Anniversary Date 9-Oct-2014
Current Balance $155,121.65
Remaining Amortization 14 year(s), 4 month(s)
Interest Rate 2.65%
Term 5 year(s), Variable
Variable Rate Adjustment Date 9-Jan-2014
Payment Frequency Monthly
Payment Date/Day 9 of Every Month
Renewal Date 9-Oct-2018
Current Payment - Principal and Interest $1,083.45
Total Current Payment $1,083.45
Next Payment Date 9-Jan-2014
12/10/13 6:44 PM
Ignore | Quote | Vote Down | Vote Up
QuinTheEskimo
173 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 4/21/13
Posts: 2790
Iamtheonepercent - If you didn't have the 30,000 but only owed 120,000. Would you borrow the 30,000 making your mortgage 150,000 to invest? Phone Post 3.0
This man knows dave ramsey Phone Post 3.0
12/10/13 6:46 PM
Ignore | Quote | Vote Down | Vote Up
Zanzoken
98 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 11/8/12
Posts: 1273
Here's what you should do, ranked by priority:

1) Pay off any credit card debt, or other high-interest debt.

2) Make sure you have an emergency fund in place. If $30k is your total amount of savings, and not just excess, you should probably just hang onto it. You need access to liquid money in case you lose your job, get sick, or suffer other adverse circumstances.

3) Fund your IRAs up to the IRS limit. Retirement saving can really add up over the long run.

4) If you have 1, 2, and 3 covered, calculate the expected return on investment. Remember that investments are risky, so you have to estimate the different possible outcomes of the investment and come up with a weighted average.

If the return on investment is significantly higher than your mortgage rate, consider the investment. If not, just pay down the mortgage, or refi to get a better rate. If the two rates are more or less equal, take the mortgage route (remember, investing is risky, paying off debt is not).

There's nothing wrong with taking risks at times, but they always need to be calculated. Phone Post 3.0
12/10/13 6:46 PM
Ignore | Quote | Vote Down | Vote Up
Choochy
167 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 11/2/11
Posts: 3731
I would pay the mortgage unless you have CC debt or some other high interest debt.

I just hated owing though so I paid my mortgage off in 4 years. Phone Post 3.0
12/10/13 6:49 PM
Ignore | Quote | Vote Down | Vote Up
rushinbear
80 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 1/1/01
Posts: 13355
icedog11 - 

refi the the house add the 30 k to reduce the loan amount and refi for 10 years


I like the idea of refinancing over a shorter time period. Keep $5K liquid though, never know when you might need some.
12/10/13 6:49 PM
Ignore | Quote | Vote Down | Vote Up
Eh_J
49 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 3/26/09
Posts: 3510
I have about 60 k in assorted investments but about 50 k is untouchable and the other 10 k is doing so well with a stock I put it into that I'm going to leave it for the time being.

I have no other credit card debts at all. I work for the government so extraordinarily unlikely that I'd lose my job...

I am leaning towards putting it all into the mortgage just to be safe.

The financial goal is to pay off this mortgage, (it's a condo in a prime area of Toronto) keep it as a rental property and hopefully buy a house.
12/10/13 6:49 PM
Ignore | Quote | Vote Down | Vote Up
rushinbear
80 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 1/1/01
Posts: 13356
but 2.65% interest is a bargain right now by variable rate mortgages are scary.
12/10/13 7:25 PM
Ignore | Quote | Vote Down | Vote Up
used2wrestle
17 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 12/1/12
Posts: 813
i had this happen to me. Decided to invest in stocks and lost most of it. investing is one of those things that's great if it works...
12/10/13 8:20 PM
Ignore | Quote | Vote Down | Vote Up
sicko
305 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 1/1/01
Posts: 25662
You probably already know this, but just in case. If you decide to pay the mortgage, make sure your $30k payment goes towards the principle and not the balance. Going towards the balance will just push back when your next payment is due, so if you have a $2k a month mortgage it'll push your next payment due date 15 months. However, if you make the payment towards your principle, it reduces how much you owe, therefore reducing how much you have to pay back each month, and therefore reduce your monthly payments
12/10/13 8:28 PM
Ignore | Quote | Vote Down | Vote Up
Zen
143 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 4/17/03
Posts: 8306
Good question, I face a similar situation, think I'll pay down my mortgage. Phone Post 3.0
12/10/13 8:33 PM
Ignore | Quote | Vote Down | Vote Up
Frills
20 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 3/15/06
Posts: 2153
If your ROI is more than the interest rate you are being charged on the house, then invest.

Portfolio diversification is key here, by paying off the house you are becoming too tied to the fluctuations of the real estate market in the area. Phone Post 3.0
12/10/13 8:57 PM
Ignore | Quote | Vote Down | Vote Up
nobadanymore
162 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 6/17/11
Posts: 6872
I don't get how people are asking what his ROI is gonna be. Well, he's not mentioned what he's thinking about Investing in, but what short term investment vehicles are available that tell you what your ROI will be?.

A 10yr US government bond is currently yielding 2.80%. Phone Post 3.0

Reply Post

You must log in to post a reply. Click here to login.