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Pay it off. A paid off house is the most important asset you can have. You don't know what's down the road, you may become disabled or laid off, and no one can take your house from you. Having no debt is much more important than having low interest debt and the mortgage tax interest deduction is not dollar for dollar. At best it would reduce your expense to equal what you 'may' make in the market at this time.
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Of course your house can be taken from you if you don't pay your taxes. If you become disabled or laid off it would be much better to have liquid assets not tied up in a house. His interest rate on the mortgage is a low fixed rates where cd's will probably go up significantly in the future. Your point of view is very common but it's also very naive.
Of course your house can be taken from you if you don't pay your taxes. If you become disabled or laid off it would be much better to have liquid assets not tied up in a house. His interest rate on the mortgage is a low fixed rates where cd's will probably go up significantly in the future. Your point of view is very common but it's also very naive.
I have only been putting my money into 3-month CDs for this reason. All indicators are showing Cds will be well above 5% in the next 6 months and could even be as high as 7% in 12 months. If you have cash, you might consider parking it for the time being, as the interest rate conditions are about to change. However, it is a nice feeling having a home paid off and I, for one, will never argue with anyone who wishes to have that security.
If you are savy, quick and aggressive, you can always put your cash to work buying and reselling stuff. I just purchased a 2008 Honda CRV from a desperate buyer for $19,600, sold it 4 days later for $23,200. I have cash, he needed to get out from under the auto before it was to be repo'd. Not a bad return on my money. I do this with all sorts of stuff. Art, antiques, exercise equipment, collectibles, you name it. If it is a deal (and there are many in this environment) I buy, sell. I average 21% annually on the $100,000 I set aside for this type of investing. I've only made one bad purchase because I do my research. and even with this, I only lost a little. Just an idea, not for everyone, but it can be lucrative and fun if you know what your doing. For me it is more of a hobby, but yes I do pay uncle sam his share. Still it is fun and not bad for something to do with your money why we all await for changes to come.
I doubt after 40 yrs of residential and commercial real estate investing and managing several large financial accounts as well as starting several million dollar businesses from scratch you could call me financially naive. I am a risk taker but I am also sensible and I realize that things can go downhill even from where they are now.
Of course your house can be taken from you if you don't pay your taxes. If you become disabled or laid off it would be much better to have liquid assets not tied up in a house. His interest rate on the mortgage is a low fixed rates where cd's will probably go up significantly in the future. Your point of view is very common but it's also very naive.
Why wouldn't you be able to pay your taxes? You're still earning an income before you are disabled or laid off, and if you have any sense you're saving or investing it. My property taxes are less than two months worth of house payments, so if you saved up a years worth of house payments you'd be able to pay property taxes for six years - longer if you're getting a fair return on your investment. Heck, it wouldn't take much to have your property taxes fully covered by interest off of investments.
I'd rather be facing the problem of finding a few thousand for taxes each year than a few thousand for house payments if I was laid off or disabled.
You can have a house AND liquid assets if you are reasonable with your money.
There is a positive physiological aspect to having your house paid for. Most people throughout their lives make "scared money decisions" due to their fear of not being able to pay their debts if something goes wrong. This tends to make them too conservative when investing and limits their potential returns. Many people find that it is easier for them to make money after their homes are paid for because they are more comfortable taking more risk.
Many people talk on investing and such but if you have someone who has never invested before or has no idea what to look into, then you really have no idea on how you could make your money work for you in that respect, not to mention the amount of money it would take to invest.
5.75 being applied to mortage, nine yrs left on mortage, i'm assuming you took the loan out 21 yrs ago and no refi or sec mortage so payments would be low, invest it in the market then if it's a decent amount going in, getting a decent return going out, do a systematic withdrawl on your investments leaving a bit of room for growth.
Will it work for you, i dunno but most people it works out good
I am free and clear, best thing I've ever done. I know all these great talk show financial advisor's tell you that you should take that nest egg and invest it and get a return of 7% while your mortgage gets a tax write off and is only 5%. But the person giving that advice has some cushion ($$$) if things go bad. If you are upside down and the stock market is in the crapper that advice is going to set you back a few years. Not good if you are getting older and not going to have much work life to recover the loss. Then the great wizards tell you to start saving early. Not good advice if you are in your 50's and divorced. When I bought my first house, I had a plan right from the beginning. Pay that thing off. I dumped everything extra on the principle. Refinanced every time the rate dropped a point. I was free in 15 years. It's a good feeling. Now I have my life boat if every thing crashes. I feel sorry for all those grasshoppers that played while the economy was in the summer time and I the ant quietly toiled away. Now I've become a vulture waiting in the tree for the desperation deal, I have cash.
Jim and TechMan, you two have just about nailed my butt to the wall. In my experiences, it seems that financial advisers don't want to mess with measly 100K investors. I have 401K $$ going backwards the last 3 quarters, and to sit on it and recover (that 'over time, the market recovers' thing) is a little tight, with my age bracket, and I had a slow recovery from the 9/11 bump that affected the markets. CD investment was the easiest and seemingly most assured, with an earnings % guaranteed at renewal; no double-digit returns, but not losing ground. Also, and most importantly, my DW don't like gettin' 'out on a limb' at all.
And no Joe, it is a refi, 15 yrs. Think about it, 21 yrs ago, there was no 5.75 anywhere (that I know of).
I doubt after 40 yrs of residential and commercial real estate investing and managing several large financial accounts as well as starting several million dollar businesses from scratch you could call me financially naive. I am a risk taker but I am also sensible and I realize that things can go downhill even from where they are now.
Sgoldie, I am with you! As a nation, we have been so spoiled by the last 20 years worth of prosperity that most folks cannot seem to understand that what goes up can come down.
People need to look at what the markets are telling them. The financials are in the toilet. The auto makers are in trouble. People are losing their homes, and filing for bankruptcy. Retail is tanking. Bank runs have been predicted for later this year and into '09 by very prestigious advisors and institutions. I'm not Mr. "Gloom and Doom" - all of this is true and can be verified with minimal research here on the web.
Why do so many people think that the business cycle is dead? It lives on. It isn't "different this time". People just get into a rut thinking that what has happened for 20 years, will continue to happen. They need to wake up and take a look around. Maybe stocks aren't the best place to be right now.
For anyone lucky enough to have the funds to pay off their mortgage, and who wishes to, go right ahead. You will not regret it. Always remember that the shills on financial TV tell you what they do because it's their job - get more people into the stock market, at all costs, at any cost. Look at who pays the salaries of these stock touts. What is their agenda? I think most people simply don't think for themselves. I know most of them don't ask enough questions!
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Now I have my life boat if every thing crashes. I feel sorry for all those grasshoppers that played while the economy was in the summer time and I the ant quietly toiled away. Now I've become a vulture waiting in the tree for the desperation deal, I have cash.
