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Old 04-14-2015, 06:38 PM
 
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Personally, Id pay off the mortgage. Theres a lot to be said for living in a paid for home, not to mention without that large monthly payment, you've essentially given yourself a raise.
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Old 04-14-2015, 06:48 PM
 
6,312 posts, read 4,760,180 times
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Quote:
Originally Posted by carnivalday View Post
Personally, Id pay off the mortgage. Theres a lot to be said for living in a paid for home, not to mention without that large monthly payment, you've essentially given yourself a raise.
You would not get the equivalent of a raise. If your investments do better than the mortgage rate you will have more money with a mortgage. If you cannot invest over a 30 year period to make more than the current 4% rates something is seriously wrong with your investment strategy. I understand the hatred for mortgages, but that hatred clouds people's thinking. This is not a matter of opinion. This is hard cold fact. You will have more money if over the long term your investments return more than the cost of the mortgage. Tax savings would be a bonus on top of that and can be substantial for many of us.
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Old 04-14-2015, 07:11 PM
 
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Originally Posted by jrkliny View Post
WHY?? You would still have the same money you would have used to pay off the mortgage and in addition you would have the investment returns that money generated. One top of that the mortgage keeps getting smaller as time goes by.
It's all so individual, isn't it? In our case it involves a blended family and inheritance issue.
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Old 04-14-2015, 08:17 PM
 
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If I were 30 years old, Id agree, but once I retire, Ill be living on a fixed income, and I will sleep much better under a roof that is paid for. Its all well and good to blab on about investments making you money, but there have been thousands of people who ended up losing their investments, and retirement money, during bad markets. It happens. If your house is paid for, it isnt nearly as significant when that happens. You won't get foreclosed on.

There a lot to be said for that, especially in retirement years. But thats just me.
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Old 04-14-2015, 08:19 PM
 
Location: Great State of Texas
86,093 posts, read 72,587,340 times
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Quote:
Originally Posted by jrkliny View Post
You would not get the equivalent of a raise. If your investments do better than the mortgage rate you will have more money with a mortgage. If you cannot invest over a 30 year period to make more than the current 4% rates something is seriously wrong with your investment strategy. I understand the hatred for mortgages, but that hatred clouds people's thinking. This is not a matter of opinion. This is hard cold fact. You will have more money if over the long term your investments return more than the cost of the mortgage. Tax savings would be a bonus on top of that and can be substantial for many of us.
That might be good advice with someone who has 30 years to wait in times of bad market dips.

One you retire though it becomes a different ballgame. Time is NOT on your side.
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Old 04-14-2015, 08:27 PM
 
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Originally Posted by whocares811 View Post
This concerns a large cash inheritance that is now just sitting in a savings account. Before continuing, just a bit of personal info:

We are 60-ish and planning to retire in four years (five at most). Our dream is to buy a smaller home in another state. We have always been fairly average as far as savings and spending; and before receiving the inheritance, we had no debts except for our car loan and our 3.75% interest mortgage; and we were looking to basically trade one mortgage for another when we retired. (With my pension and our combined social security, we would have enough to live on, even with our current mortgage payment.)

Now with the inheritance, we are able to pay off the mortgage in full and start retirement entirely debt free (paying "cash" for the new home after our current home sells). However, the "fee-only" CFP we just consulted has advised us that we should continue with a mortgage, even into retirement, and except for paying off the car ($16K remaining on a 3.75% interest loan), that we should invest the inheritance money in stocks and bonds. However, we (and especially I) are very uncomfortable doing so, as we have always been "bird in the hand" type people and are definitely not risk takers.

Does anyone have any personal experience with this kind of situation? And/or what would you advise?
Don't "invest" in the stock market, unless that is money you won't miss if you lose it all.

You are WAY too close to retirement to be fiddling about with the stock market.

In your situation, the best thing to do is pay off your home and car, and put anything left into something safe, like a treasury bond, savings account, money market fund - anything that guarantees you 100% that you won't lose the principle and interest. Just make sure that the maturity dates are coordinated with your retirement date so that you won't have to pay penalties for early withdrawal.

Also you should keep some amount in an easy-to-access savings account for emergencies - as long as you have enough discipline that you aren't likely to think that new couch you saw might be an "emergency", LOL! It certainly sounds like that wouldn't be a problem for you.

Yes, the interest earned is low at present. In fact, look at paying your mortgage off as an investment that pays you 3.75% interest.

Anyone who tells you NOT to pay that off before investing does not have your best interests at heart. There are a lot of unethical "investment specialists" out there who only want whatever fees and kickbacks they can get for selling you stuff.
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Old 04-14-2015, 08:54 PM
 
168 posts, read 130,109 times
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I had to make the same decision 3 years ago. I spoke to four people. Two said keep the mortgage and invest. Two said pay off the mortgage. So I looked at the people advising me. The two who advised me to pay off the mortgage had been in the financial business for.over 30.years both were very well off and one was retired at age 52. Both had paid off their own homes and carried no debt. The other two people were not doing so well. All were in the same age group. I paid off my mortgage and I cannot express the peace of mind it gives me to know that debt is gone. Just my experience.
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Old 04-14-2015, 09:03 PM
 
Location: Great State of Texas
86,093 posts, read 72,587,340 times
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Is it any coincidence that "DEBT" is a 4 letter word ?
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Old 04-14-2015, 09:06 PM
 
6,845 posts, read 3,884,515 times
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Quote:
Originally Posted by carnivalday View Post
If I were 30 years old, Id agree, but once I retire, Ill be living on a fixed income, and I will sleep much better under a roof that is paid for. Its all well and good to blab on about investments making you money, but there have been thousands of people who ended up losing their investments, and retirement money, during bad markets. It happens. If your house is paid for, it isnt nearly as significant when that happens. You won't get foreclosed on.

There a lot to be said for that, especially in retirement years. But thats just me.
It's not just you! Many of us feel the same way. We've experienced the bad markets and are wise enough to be sensible.
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Old 04-14-2015, 10:31 PM
 
6,981 posts, read 4,465,367 times
Reputation: 5146
Quote:
Originally Posted by whocares811 View Post
This concerns a large cash inheritance that is now just sitting in a savings account. Before continuing, just a bit of personal info:

We are 60-ish and planning to retire in four years (five at most). Our dream is to buy a smaller home in another state. We have always been fairly average as far as savings and spending; and before receiving the inheritance, we had no debts except for our car loan and our 3.75% interest mortgage; and we were looking to basically trade one mortgage for another when we retired. (With my pension and our combined social security, we would have enough to live on, even with our current mortgage payment.)

Now with the inheritance, we are able to pay off the mortgage in full and start retirement entirely debt free (paying "cash" for the new home after our current home sells). However, the "fee-only" CFP we just consulted has advised us that we should continue with a mortgage, even into retirement, and except for paying off the car ($16K remaining on a 3.75% interest loan), that we should invest the inheritance money in stocks and bonds. However, we (and especially I) are very uncomfortable doing so, as we have always been "bird in the hand" type people and are definitely not risk takers.

Does anyone have any personal experience with this kind of situation? And/or what would you advise?
Remember that "Advisors" are going to steer you in a direction that helps them in some fashion. I don't think you should spend money on "Stocks and bonds" unless you're a stock or bond expert. If i told you that you should invest your money by purchasing goats, your first thought would be "but i dont know anything about goats" so its the same with stocks, unless you are a stock "expert" why invest money in something you know nothing about? Its better off sitting in a bank account making 0 interest, at least you won't lose the principal.

It might be better to invest the inheritance money in buying another house...that way, you can own the house outright, give the house some TLC and get a renter in there and make a profit off the rent. There's no real risk, you'll own the house which should appreciate over time and you'll make money monthly on collecting rent...its much safer than buying stocks imo.
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