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With today's pathetic interest rates it seems like it makes more sense to put my extra cash into my house. I have about $30k that I can either pay off my house with or invest for the longer term. Do the low interest rates make it smart to pay your debt down instead of invest?
Just a quick take...if you pay off your mortgage and your payments were 900-1000 per month...in 3 years you would have saved or could save $30,000(roughly). Hopefully gaining equity in your home as well...yes hopefully.
First I'd pay off any credit card debt or other loan. Then, I'd look at investing in local real estate. Interest rates are low and prices are more realistic.
Only if I was a year or two from retirement, would I consider paying off my personal house.
It all depends on whether you think you can do better investing in something than the guaranteed 5% (or whatever your mortgage rate) you would "earn" on prepaying your loan. From an asset allocation perspective, prepaying your mortgage is a conservative investment akin to corporate bonds. If you already have exposure to stocks but not much in fixed income it could be a good idea. It sure beats CD and Treasury rates these days. This is assuming you don't need the $30k to be liquid and you have a stable income. Another thing is that any capital gains you have would be taxed at the capital gains rate, so you would have to get more like 6% return on your investment to beat paying your mortgage principle.
If you have the extra cash, (and are still very liquid after paying down the mortgage), it's always best to pay off debt, starting with the highest interest debts first.
So if you have credit card debt, pay that off first. Than start considering paying down the mortgage principal, assuming you maintain your liquidity cash cushion.
So many people get themselves in a bind when they lose that cushion.
Maybe I'm just paranoid, but I always like to maintain 24 months of living expenses cash (and this excludes my taxable investment accounts, and this also excludes my retirement accounts).
With today's pathetic interest rates it seems like it makes more sense to put my extra cash into my house. I have about $30k that I can either pay off my house with or invest for the longer term. Do the low interest rates make it smart to pay your debt down instead of invest?
Well I don't know what your mortage rate is or the CD rate but I assume the mortage rate is higher than the CD and it would be in most cases. It makes sense to pay off your house.
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