Payoff Mortgage or not?

Discussion in 'Economics' started by midlifeguy, Dec 22, 2007.

  1. If you have enough money to payoff your mortgage,
    would you do it? I have heard pros and cons but do not
    want to risk losing money in the markets with money that could be used to be house debt free.
  2. Depends, what kind of mortgage do you have: fixed or variable?

    And what interest rate are you paying..

    Personally i have a mortgage and cash that could be used to pay it down invested elsewhere, however if i had surplus cash (due to lack of good investment opps), or if my variable mortgage interest rate skyrocketed i would think about paying down my mortgage, atleast temporarily.
  3. After tax-break, what's your riskless return? If you're willing to add variance, by all means trade your money instead of getting a riskless return.

    Put it this way: would you rather put your money in a federally insured muni bond or would you rather take on additional risk to possibly get a greater return?

    It's simply a matter of risk preference
  4. i'm in that situation and i'll never pay off my mortgage.

    at the least you should have a heloc if you pay off your first mortgage. i'd be nervous if i had a lot of money banked in the house and then an emergency happens and i can't "withdraw" it.

    then again i don't trade/invest in things that are likely to have 20% drawdown in any given month, like many people here, so i'm not as worried about losing money that could be used to pay off the house.
  5. do not pay off your morgagte! money tied to a house is basically dead money if not for the sake of quick sale, just for the purpose of sheltering.

    of course if you hve lots of money, and the money on a house mean nothing to you. then it is totally different.
  6. u21c3f6


    Assuming you don't have an interest only mortgage, I would pay off the mortgage as long as that still left me with a "decent" amount of cash. My definition of "decent" is to have enough cash to prevent me from having the need to take out another mortgage on my house based on possible future needs and/or emergencies.

    This is easier to deal with if you have an interest only loan where your P&I is adjusted based on the outstanding balance. You could keep a "decent" amount of cash on hand while paying down the mortgage with any "excess" cash. You could also pay an interest only mortgage down to have a specific P&I or to be paid off by a specific future date based on a P&I you select to pay.

    Think of it this way, if someone had a paid off house and they asked you if they should take out a mortgage for "investment" funds, what would you tell them?

  7. lfkc60a


    If you had a different job, keep the mortgage.

    With this job there is much to be said for the peace of mind knowing you dont "need" to make a check to cover your expenses every month. I think a clear head will make you more money than you are "saving" by not paying off your mortgage.

    If this would take most of you available cash, open a HELC just in case you need the cash for an emergency.

    I've seen many traders over the years let their debt get away from them, and eventually blow up their accounts as a result.
  8. Artie21


    I keep a mortgage, although my cash position exceeds the loan balance.

    I have 70% equity I like the psychological comfort of having a reasonable nut and control of my property.
  9. the place i live in now is paid off, i have decent amount of cash laying around but as a trader I like to keep my expenses as low as possible since this is a profession where there is no certainty of what my income will be in the future
  10. Div_Arb


    I like having no bills and no debt because I feel I have more flexibility. With that said, i am paying down my mortgage and should be finished in 2010. At that time, I will completely retire from the real world and trade my plan full time.

    I say pay off the house, assuming you aren't going to wreak havoc somewhere else on your balance sheet.
    #10     Dec 26, 2007