Do you prefer to pay down your mortgage principal, or make minimum payments and invest the rest?

[BC_89]

Technical Issues, re-merging mortgage threads.

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[mentos]

Do you prefer to pay down your mortgage principal, or make minimum payments and invest the rest? I personally hate debt so I've been doing both. At first I was obsessed with paying down the mortgage, but rates are so low now.

Just to clarify, this is assuming you have no other debt and already max out retirement accounts.

 

[Momus]

Always minimum. Keep it forever.

Math works in your favor. In 30 yrs in the future, you will look back, that's **** money I pay every month in monthly mortgage while you have a big fat balance in your investment account.

A 400k equity in the house appreciates the same amount vs. 0 equity in house. The house is still gonna appreciate the same rate no matter how much money you dump into it. You can make more dumping 400k in the stock market 8-10%/yr vs. make 2.5% paying off your mortgage early.

 

[confettiflyer]

I’d get a 50 year mortgage at these rates if I could, lol

 

[mentos]

There's something to be said about being debt free though. I paid my student loans off aggressively and it was the best feeling ever.

 

[ValeRx]

There's something to be said about being debt free though. I paid my student loans off aggressively and it was the best feeling ever.

I agree that debt free is a good feeling... I freed up a lot of available funds last month but I decided to invest rather than throw a bunch of money at my student loans. As long as rates of return on investments are higher than the interest on your mortgage (which they should be) it makes more sense to invest. I've increased my TSP contribution and will be maxing out a Roth IRA by the end of the year.

 

[PharmDBro2017]

I've been doing a little bit of both personally.

 

[owlegrad]

If you wouldn’t take out a mortgage to invest in the stock market it makes more sense to pay off the mortgage early.

Having said that, I do a bit of both.

 

[pezdispenser]

I did both but in this order: I invested spare cash first, then whenever I made large 20-50% gains, I sold and used the profits and principal to pay down a chunk of my mortgage (usually ~$50k chunks). Then I waited for a dip and built up my investments again, and repeated the process until my $310k mortgage was paid off in 7 years.

The main benefit of a paid off mortgage is it frees up a lot of cash flow. Also, the stock market does have an expected return of ~8-10% over the long run, but like I showed, sometimes it goes up 20-50% but other times it goes DOWN 20-50%. Ask yourself whether you and your family are willing to ride that rollercoaster, and can you hold on during the dips while still making your mortgage payment and everything else.

 

[Dr Wario]

In my case, the balance of my mortgage is quite low (under 1 year salary) so I have started to make more aggress payments to get it fully paid off. I am doing this because the additional cash flow (lack of a fixed expense) will greatly increase my confidence to take on more risk which may net better yield than market returns. I would like to purchase or build a property management business or some other such entity, knowing that my lifestyle will not change if things don't work perfectly when starting out will give great resolve.

 

[Gombrich12]

Paying down a sub 3% mortgage makes no sense to me, if you can't beat that over the time remaining in the stock market something has gone very wrong.

 

[PharmDminus]

would you take out a home equity loan to invest?

 

[mentos]

would you take out a home equity loan to invest?

No, too risky for me.

 

[rickyroxy]

Thinking of taking out home equity to buy rental property.

 

[TranslationalRPh]

I do both. While I hate debt too, I love real estate and stock investments. Personal debt is zero (>12 years). No more than one mortgage at a time. I always pay off properties early. That's just how we do it. I am sure Dave Ramsey would tell us we are wrong.

 

[lord999]

You're one of the most pessimistic people about your own job security and profession, so having debt costs more for the insecurity. Most people here are optimists, so having eternal debt works because they think they'll be able to keep that income forever (or in the cases of very competent, could trivially pay off the mortgage but choose not to for growth reasons).

I did pay off my only mortgage (4X annual salary at the time) in 6 years aggressively and did not regret it even though I missed out on stock market gains, because 2008 would have destroyed my portfolio anyway. And for the civil service as was explained to me early in my career, being debt free has certain unusual benefits in terms of getting retention bonuses and other benefits that most are not aware of. The issue was that we sold and upscaled during 2008 and were able to finance it due to the downturn. We're going to be doing so again (buying up a bankrupt neighbor and adjoining) as the market fails.

Your indebtedness should be tied to your ability to service that debt. Speaking from how the early 80s turned out in the last surplus, pharmacists having no debt was better than servicing debt, but the interest rates were 15%-18% at the time. In this market with interest rates this low, as long as you can find the cash to service the debt, you can buy yourself time. The general rule though is that the monthly sum is not to exceed 50% of your paycheck if aggressive and the maximal unemployment benefit if conservative.

 

[PharmDBro2017]

With the current job market for PharmDs... it helps peace of mind paying off the mortgage quicker (after my 401k/HSA is maxed).

 

[Chrish]

Conventional wisdom is invest and pay minimum at current rates.

However, I hate debt like cancer and so I would be looking to pay off my mortgage within next 5 years assuming I still have a stable income.

 

[mentos]

With the current job market for PharmDs... it helps peace of mind paying off the mortgage quicker (after my 401k/HSA is maxed).

On the flip side, say you pay down an extra 100k and you lose your job. Wouldn't you rather have that 100k in liquid stocks instead of stuck in your house equity?

 

[Momus]

If you have 400k in stocks, fast forward in just 10 years (rule of 72), it becomes 800k. That $800k stocks with 4% withdrawal rate is $2666/mo, that can pay off monthly mortgage for the next 30 years without touching the principal.

On the other hand, if you have 400k money in the house, you will have a fat 0 return on that money, it's dead money (well, earning 2.5%). It's a peace of mind being debt free but it's really not a rational choice. I tend to go for the most rational choice. That's why I will never pay mine off.

 

[mentos]

If you have 400k in stocks, fast forward in just 10 years (rule of 72), it becomes 800k. That $800k stocks with 4% withdrawal rate is $2666/mo, that can pay off monthly mortgage for the next 30 years without touching the principal.

On the other hand, if you have 400k money in the house, you will have a fat 0 return on that money, it's dead money (well, earning 2.5%). It's a peace of mind being debt free but it's really not a rational choice. I tend to go for the most rational choice. That's why I will never pay mine off.

How does the dead money earn 2.5%? Is that the average rate of appreciation on a house? Some areas have crazy high appreciation.

 

[Momus]

How does the dead money earn 2.5%? Is that the average rate of appreciation on a house? Some areas have crazy high appreciation.

It's the mortgage interest. You are effectively earning 2.5% interest by paying off your mortgage.

The appreciation of the house isn't gonna change whether you carry a mortgage or pay it off.

 

[mentos]

One thing people haven't mentioned is that it takes a lot of discipline to stay invested. People may panic sell if the market crashes, make lousy investments and lose, or spend money that otherwise would have been untouched. For example if someone had 200k in their account then they might be tempted to buy a new 50k car instead of a 20k car. I'm not saying everyone would do this, but you gotta agree that some people would blow that 200k and wish they would have paid down the mortgage instead.

 

[TranslationalRPh]

It's the mortgage interest. You are effectively earning 2.5% interest by paying off your mortgage.

The appreciation of the house isn't gonna change whether you carry a mortgage or pay it off.

Not advocating with home speculating but return can far exceed 2.5%. From over the 4.5 years we took to pay off our house, it appreciated 75%. It's all about location, right?

 

[awval999]

I think every pharmacist needs to be planning for the end. This career is ending. And ending quickly. Retail is just the canary in the coal mine.

The answer to this question depends on your family situation.

If you are one of the single Cali bros -- with a $1M mortgage on a shack at 2.75% 30 year, then of course, you need to be investing into the stock market because you have no hope to pay off that mortgage, and when **** hits the fan, you can always just walk away in Cali cause the mortgages are non recourse and then you can take your 401k and taxable accounts to flyover. And hopefully the housing market in Cali continues to grow and you can take the equity into flyover as well.

I think the math significantly changes if you have a family and live in a normal housing market, in LCOL or MCOL areas. For example, in my situation, with two children and a stay-at-home spouse, I live in flyover with a small house in a good school district. I refi'd to a 15 year and am paying additional payments to get it paid off by the time I'm 45, which is 10 years away. The remaining mortgage amount is $175k. And I don't think even that is even quick enough before the end. When I run the numbers though, to increase the additional principle amount, I'd have to reduce the amount I place into 403b, HSA, etc, which gets my marginal rate down to 12%. It's a large jump going from 12% to 22% marginal just to pay off a 3% loan earlier. My wife understands if we can make it 5 years, we at least could sell and buy the same house in a marginal school district. But if I can make it to 45, then we've won. Monthly net expenses would be $25,000/year. And a technician job would support the family.

Let me be clear -- If we checked in on this thread in October 2050, the math clearly would show that investing in a diversified mutual / index fund is better than paying off a 3% 30 year mortgage. The issue is that this career won't be here then.

 

[PharmDBro2017]

On the flip side, say you pay down an extra 100k and you lose your job. Wouldn't you rather have that 100k in liquid stocks instead of stuck in your house equity?

You're not wrong. But I'll play devil's advocate too.

If my money is in stocks and the market suddenly dips hard/crashes and my 100k is now worth 50-70k and I lose my job too and end up needing it asap... that would suck. One of the biggest expenses is a mortgage; if you lose your job but don't have a mortgage you can scrape by far longer.

 

[mentos]

Not advocating with home speculating but return can far exceed 2.5%. From over the 4.5 years we took to pay off our house, it appreciated 75%. It's all about location, right?

He's talking about the mortgage interest, not appreciation. Your house will appreciate 75% whether you have a mortgage or not. By making extra principal payments, you are "earning" 2.5% assuming your mortgage rate is 2.5%. His point is that you can pay the mortgage down and earn 2.5% or invest and make 7-11%.

You're not wrong. But I'll play devil's advocate too.

If my money is in stocks and the market suddenly dips hard/crashes and my 100k is now worth 50-70k and I lose my job too and end up needing it asap... that would suck. One of the biggest expenses is a mortgage; if you lose your job but don't have a mortgage you can scrape by far longer.

Well if your money is all in your home equity then you wouldn't have any of that 50-70k available. You'd have to sell your house.

 

[TranslationalRPh]

He's talking about the mortgage interest, not appreciation. Your house will appreciate 75% whether you have a mortgage or not. By making extra principal payments, you are "earning" 2.5% assuming your mortgage rate is 2.5%. His point is that you can pay the mortgage down and earn 2.5% or invest and make 7-11%.

Yes, your house will appreciate regardless of whether or not you have a mortgage. The point is though the amount of your equity that appreciates is based on how much equity you have in the house in the first place. Thus, if your equity base is higher because you aggressively paid off the house, you have effectively gained additional appreciation in your invested funds. Thus, 75% of a much larger base/4.5
years plus interests savings (minus expenses) would be your annualized return (ie, >2.5%/year)

 

[bacillus1]

I am paying my condo mortgage first (bought 3 years ago, 3.25% interest). Should be able to pay it off in a few months. If things go well with the SO, will likely get a bigger house next summer/fall while keeping the condo and renting it out. Will be nice to only pay tax/HOA on the condo in the meantime if no one wants to rent or buy it, so planning to only increase my TSP contribution past my current level once the mortgage is paid off.

 

[RogerWilco]

And for the civil service as was explained to me early in my career, being debt free has certain unusual benefits in terms of getting retention bonuses and other benefits that most are not aware of.

Can you provide more details on this benefit please; specifically how debt or lack thereof relates to retention bonus or other benefits within civil service (and if it agency specific) ?

Thank you

/r

 

[Momus]

Yes, your house will appreciate regardless of whether or not you have a mortgage. The point is though the amount of your equity that appreciates is based on how much equity you have in the house in the first place. Thus, if your equity base is higher because you aggressively paid off the house, you have effectively gained additional appreciation in your invested funds. Thus, 75% of a much larger base/4.5
years plus interests savings (minus expenses) would be your annualized return (ie, >2.5%/year)

This is not how leverage works at all. You do not get additional gain having money in the house.

You are only saving your mortgage interest if you pay down your house. Compound saving of 2.5% (however many yrs) vs. Compounded savings of the difference between expected stock returns - mortgage interest.

Leverage will give you a lot higher amount at the end.

 

[lord999]

Can you provide more details on this benefit please; specifically how debt or lack thereof relates to retention bonus or other benefits within civil service (and if it agency specific) ?

Thank you

/r

The internal OPM guidelines on retention bonuses and certain benefits related to certain jobs (especially those that are interagency or sensitive) are tied to debt or commitment loads as a disqualifying factor. For the DoD, the major difference is for sensitive positions beyond the S norm, there is some internal cutoff. I never was told explicitly what that line was though it's rumored to be around a 35%-40% DI ratio for all debt including mortgage (as I understand it, the term payment not the total amount), but I have been told no on people under those grounds even when there is not an Article 134 issue with bad debt though having enough to be qualified for SCRA. You never get to know the exact criteria as a supervisor, but too much debt or too long a required commitment are the reasons put on paper for the unsuitability. You are also explicitly disadvantaged if you have a commitment for certain competitive jobs against those without any commitment (especially if this is someone that DoD wishes to retain, the competitive medical residency game works this way for Navy as an example). Pharmacists in the previous generation did not hit those debt limits that often, but those within this generation do. For Special Contribution awards and certain jobs, VA and HHS will adjust retention bonuses accordingly though most pharmacists do not merit either of those (if your annual bonus is less than 5% of salary, this does not apply to you as those funds are under the bar, we're talking about the $15k-40k amounts for ECF or PP levels).

 

[RogerWilco]

The internal OPM guidelines on retention bonuses and certain benefits related to certain jobs (especially those that are interagency or sensitive) are tied to debt or commitment loads as a disqualifying factor. For the DoD, the major difference is for sensitive positions beyond the S norm, there is some internal cutoff. I never was told explicitly what that line was though it's rumored to be around a 35%-40% DI ratio for all debt including mortgage (as I understand it, the term payment not the total amount), but I have been told no on people under those grounds even when there is not an Article 134 issue with bad debt though having enough to be qualified for SCRA. You never get to know the exact criteria as a supervisor, but too much debt or too long a required commitment are the reasons put on paper for the unsuitability. You are also explicitly disadvantaged if you have a commitment for certain competitive jobs against those without any commitment (especially if this is someone that DoD wishes to retain, the competitive medical residency game works this way for Navy as an example). Pharmacists in the previous generation did not hit those debt limits that often, but those within this generation do. For Special Contribution awards and certain jobs, VA and HHS will adjust retention bonuses accordingly though most pharmacists do not merit either of those (if your annual bonus is less than 5% of salary, this does not apply to you as those funds are under the bar, we're talking about the $15k-40k amounts for ECF or PP levels).

Appreciate the knowledge - thank you for sharing!

/r

 

[confettiflyer]

If you are one of the single Cali bros -- with a $1M mortgage on a shack at 2.75% 30 year, then of course, you need to be investing into the stock market because you have no hope to pay off that mortgage, and when **** hits the fan, you can always just walk away in Cali cause the mortgages are non recourse and then you can take your 401k and taxable accounts to flyover. And hopefully the housing market in Cali continues to grow and you can take the equity into flyover as well.

I feel seen, lol. Points of clarification, many homes in the valley are purchased cash or with large down payment (thank you IPO money). If you have to “struggle” to make the payment, you weren’t coming up with a $250,000 down payment to begin with.

I’ve seen the shack listings that go viral, but those are usually tear-downs, or are in highly limited areas like beachfront/oceanfront.

I think about 75% of my friends who purchased in the $800k-$1.3M range did so with the intent of multigenerational housing (these are 2500-4000 sq ft homes in the suburbs), so you now have about 3-4 income streams helping pay directly or indirectly. I don’t have hard stats, but culturally this is the norm, enforced by finances.

The other elephant in the room is the artificially low property tax rates in CA - the pressure to buy sooner rather than later exacerbated housing supply, since your tax basis is locked on purchase and inheritable down multiple generations (this is apparently not the norm nationwide).

To your point about flyover, a handful of acquaintances of mine have sold and relocated to Idaho, Arizona, and Las Vegas with all cash acquisitions. I’m a lot more optimistic than you about pharmacy outlook (perhaps as a function of my current job - you can’t really carve out chemotherapy functions), but there’s something to be said about permanently lowering your costs to maintain flexibility in career moves.

 

[APN-59 rph]

I think every pharmacist needs to be planning for the end. This career is ending. And ending quickly. Retail is just the canary in the coal mine.

The answer to this question depends on your family situation.

If you are one of the single Cali bros -- with a $1M mortgage on a shack at 2.75% 30 year, then of course, you need to be investing into the stock market because you have no hope to pay off that mortgage, and when **** hits the fan, you can always just walk away in Cali cause the mortgages are non recourse and then you can take your 401k and taxable accounts to flyover. And hopefully the housing market in Cali continues to grow and you can take the equity into flyover as well.

I think the math significantly changes if you have a family and live in a normal housing market, in LCOL or MCOL areas. For example, in my situation, with two children and a stay-at-home spouse, I live in flyover with a small house in a good school district. I refi'd to a 15 year and am paying additional payments to get it paid off by the time I'm 45, which is 10 years away. The remaining mortgage amount is $175k. And I don't think even that is even quick enough before the end. When I run the numbers though, to increase the additional principle amount, I'd have to reduce the amount I place into 403b, HSA, etc, which gets my marginal rate down to 12%. It's a large jump going from 12% to 22% marginal just to pay off a 3% loan earlier. My wife understands if we can make it 5 years, we at least could sell and buy the same house in a marginal school district. But if I can make it to 45, then we've won. Monthly net expenses would be $25,000/year. And a technician job would support the family.

Let me be clear -- If we checked in on this thread in October 2050, the math clearly would show that investing in a diversified mutual / index fund is better than paying off a 3% 30 year mortgage. The issue is that this career won't be here then.

I think that this about sums it up....The chance of you flogging pills for 100k in even 5 years....well I'll give it 50/50 but am pretty sure it will be worse.. Now..suppose that there is a big war and you guyz all get drafted and paid peanuts..assuming you survive. It would be nice to have a big chunk paid down on whatever loans you have..SGLI would help...Now..if you happen to be single..no kidz..etc...invest away....I doesn't really matter then...

 

[TateThePharmacist]

Pay off the mortgage first, then when you retire reverse mortgage that $*!# BOOM! Retirement plan baby!!

Haha seriously though, this is an interesting topic and one that I was seriously thinking about prior to this being posted. On paper the numbers make sense to invest extra funds into the stock market instead of paying off your mortgage (typically you'll end up with 4-6x more than the amount you'd save by paying off your mortgage early) however sometimes that requires balls of steel and there's definitely something to be said about not having debt. Just the massive increase in monthly funds would be super nice.
I plan to own several rental homes (mix of long term renters and airbnb properties). Not throwing numbers out there but I'm currently in the process of purchasing a rental home that I should have a surplus of income from rent each month. Trying to decide if I should take the surplus each month and invest it into the stock market (with the intention of using it for down payments for future rentals) or roll it into the mortgage on the rental to try and snow ball it for when I start picking up more properties? Or even at what point I should switch from one strategy to the other?

 

[lord999]

Pay off the mortgage first, then when you retire reverse mortgage that $*!# BOOM! Retirement plan baby!!

Haha seriously though, this is an interesting topic and one that I was seriously thinking about prior to this being posted. On paper the numbers make sense to invest extra funds into the stock market instead of paying off your mortgage (typically you'll end up with 4-6x more than the amount you'd save by paying off your mortgage early) however sometimes that requires balls of steel and there's definitely something to be said about not having debt. Just the massive increase in monthly funds would be super nice.
I plan to own several rental homes (mix of long term renters and airbnb properties). Not throwing numbers out there but I'm currently in the process of purchasing a rental home that I should have a surplus of income from rent each month. Trying to decide if I should take the surplus each month and invest it into the stock market (with the intention of using it for down payments for future rentals) or roll it into the mortgage on the rental to try and snow ball it for when I start picking up more properties? Or even at what point I should switch from one strategy to the other?

The big question in your case is between cash flow and underlying tied capital value (with depreciation) of the rentals. Is the market overheated and due for a crash? Yes! Are properties in hot cities (Austin) undervalued? Yes! These can both be true and the exciting part is knowing the specifics from the generalities. Can you make a play that you buy an undervalued property in an overheated market while preserving enough cash flow to keep afloat? Making that passive income is not free, you spend intellectual energy figuring out a solution. We are in the midst of a cash flow check, if you were running too far negative in cash flow and not able to secure a loan, then you're dead. It may come to an issue where finding good renters is at a premium.

If our economy follows Japan or Singapore, then no. Real estate inverted compared with the market. The market investing was better off in general, though the few property magnates were clear winners.

If our economy follows postwar Germany, then buying and holding property is the long-term play, but more so for your children than for yourself.

 

[lord999]

Let me be clear -- If we checked in on this thread in October 2050, the math clearly would show that investing in a diversified mutual / index fund is better than paying off a 3% 30 year mortgage. The issue is that this career won't be here then.

I agree with all the above points but this one. Not necessarily. In a truly mature productivity economy, it's a wash or a slight loss with no growth. The last time this was true was before electrification. If you had bought and held from the 1873 (the lowest point of the economy to that point) to the Roaring 1920s which was the highpoint of that economy, you still would have been cleaned out multiple times (1893, 1906) in the interim. We are still within the greatest peacetime economic expansion. This has always been one of the hardest questions of economics, can you have prosperity without growth? No government has managed to do it for more than a generation. And we're going to have a natural experiment with declining productivity per worker with COVID. Irrespective of politics, we simply do not have a clear way to get back to the way things were before COVID with the same industrial and retail organization right now. Most of those financial analysts never read or understood economic history, not the Japanese, not the Germans, and not us.

Let's put it this way, our parents had the ability to invest in the 1980s to today with an "easy" 10-15% yoy to wealth. But how many parents that you know have $4M+? Mine are that way, but not due to the market. Most pharmacists I know from that period never made it to $2M, and that's trivial given their income and wealth.

The allocation question is one that I think we all have to return to every 4 years or so if you don't already have your debt paid off. The real "interest" payment to being debt free is that it is not even a question of balancing, but that of allocation. Yeah, there's opportunity costs in faster debt retirement, but there is opportunity profit in not having to consider any financial counterparty when making any other plans. Once you are debt-free (as I argue you are nominally in already right now), you don't have to make any decisions but wait for time to elapse. It's only those who are in debt that have to make decisions to avoid ending up with 0. Investment decisions get tainted with simultaneous debt ones. From gambling theory, that is not a good place to be.

In your case though, 10 years from now, you and your family will cleanly win with no downsides but time elapsed, and I agree with your math. I would additionally say that you probably have already marginally "won". Should you find yourself in the unfortunate position of needing to take a median wage household income ($40-60k), your 403b and such probably cover your mortgage to be "debt-free" with the house but without additional retirement. Your household expenses at $25k are enough that at $60k, you make probably make the mortgage payment without any other hard sacrifices. Not that you want to do it that way, but you've already worked hard enough to avoid any family life-threatening financial risk at this point. Although not ideal, I do consider your position debt-free that your family doesn't have to overtly lose quality of life now but lose a future. 10 years from now, you'll have both quality of life and a future and could consider making a play for a bankrupt Californian (or buy back the arm and leg from your children's college tuition). Who knows, but it's your household that makes the decision, as even now, you have the level of assets that don't force an interaction a bank or some other financial entity on their terms.

One other problem that you've already solved in your favor, you don't work the standard retail pharmacist job. It's hard to remember because we just don't see it, but for many years, we've traded stability for salary. Unless you manage to fire yourself, your career stability is such that even with the profession dying, the likelihood of it directly causing you to lose your job if you treat the job as an asset worth protecting is low. Sure, there's probable salary cuts and no replacement for lost labor in our futures, but job security especially when older is something worth more than the immediate dollar. You've already taken the sacrifice to make longer term winning plans, the best kind of plans.

 

[PharmDBro2017]

Here's an interesting article to read about the "pay off my house early vs. invest in stock market" argument that we often see on this forum. Enjoy the read.

Pay off the House vs. Invest. Which is Better?

I saw a recent conversation on social media where someone stated that he only had a few years left on his home mortgage, so there wasn’t much interest left to pay. Because of this he felt it was far better to pay out the mortgage as scheduled and invest his money for a higher return. He saw no advan

financialsuccessmd.com

 

[rxkrafted]

I'd say invest in stocks especially if you have a low rate or able to refinance with a lower rate during this time

 

[radio frequency]

Depends on your view of the future. Mine is paid off, but I also live in a cheap house and wanted a little more security for the family in case something happened to me. I still invest a lot. You’ll get much better returns long term in the market, but it felt risky short term with our current situation in the States.

 

[Rockinacoustic]

Repost: Pay down mortgage principal or invest?

 

[mentos]

Doing a little of both now cause I hate debt, have a big mortgage, and just started investing outside retirement accounts. If I can get my play money account up to 100k then I'll consider making min payments and putting it all in the market.

 

[owlegrad]

It’s a cool article but the quote that always comes to mind for me is “would you refinance your house to invest in the market?”. Take a holistic approach to finances. If you wouldn’t take out a loan to invest, why are you comfortable investing money when you have a loan?

Having said that, I do a little of both.

 

[mentos]

It’s a cool article but the quote that always comes to mind for me is “would you refinance your house to invest in the market?”. Take a holistic approach to finances. If you wouldn’t take out a loan to invest, why are you comfortable investing money when you have a loan?

Having said that, I do a little of both.

Well taking out a home equity loan gives gives you six figures instantly.

We're only talking about a couple thousand per month at a time to invest vs pay mortgage.

 

[PharmtoCS]

Not a home owner here but I would make sure that you have enough emergency funds to pay for a year’s worth of expenses or so given the likelihood of us being laid off and unemployed for an extended period of time. Then invest the rest.

Aren’t mortgage interest rates practically negative after inflation?

 

[PharmDBro2017]

Repost: Pay down mortgage principal or invest?

My bad. I know we've discussed it a lot but forgot it had its own thread.

Was hoping people would read that article and post their thoughts on it.

 

[TateThePharmacist]

It’s a cool article but the quote that always comes to mind for me is “would you refinance your house to invest in the market?”. Take a holistic approach to finances. If you wouldn’t take out a loan to invest, why are you comfortable investing money when you have a loan?

Having said that, I do a little of both.

In the market? No
In bitcoin?......

haha but seriously, that's a really interesting approach and may be one that I adapt for my own situations.

 

[radio frequency]

He's talking about the mortgage interest, not appreciation. Your house will appreciate 75% whether you have a mortgage or not. By making extra principal payments, you are "earning" 2.5% assuming your mortgage rate is 2.5%. His point is that you can pay the mortgage down and earn 2.5% or invest and make 7-11%.



Well if your money is all in your home equity then you wouldn't have any of that 50-70k available. You'd have to sell your house.

Nobody said to pay off your mortgage at the expense of your emergency fund. You need to consider this move holistically.

 

[Momus]

Here's an interesting article to read about the "pay off my house early vs. invest in stock market" argument that we often see on this forum. Enjoy the read.

Pay off the House vs. Invest. Which is Better?

I saw a recent conversation on social media where someone stated that he only had a few years left on his home mortgage, so there wasn’t much interest left to pay. Because of this he felt it was far better to pay out the mortgage as scheduled and invest his money for a higher return. He saw no advan

financialsuccessmd.com

Well, I gain nothing reading this.

5 yrs is a very short term. I'm not paying my mortgage for 30 yrs, it'll always come out hundreds thousand dollars ahead vs. Paying it off in 5 yrs.

Not all debt is bad. Leverage can be a very powerful tool to increase wealth. House debt is one of the most conservative leverage you can do once your investment account gets large enough so I'm never paying that off.

Then again, everyone is different. You do you.