Invest Or Pay Mortgage

TURTLEDOVE · #1 (**permalink**) 01-17-2007, 08:04 PM

I Have An Arm Loan Currently At 7.75% That Caps At Around 30%. The Amount Of The Loan Is 21,800. I Am Currently Making Just The Minimum Payment Which Only Covers The Interest.

My Question Is Should I Use The 20,000 Cash I Have To Pay Down The Loan Or Should I Invest The Money Elsewhere?

Fyi I Am 34 And Married With Two Kids With Only Around 26,000 Currently Invested In Iras And A Little Stock.

Thanks For Any Advice.

safari · #2 (**permalink**) 01-17-2007, 08:22 PM

Definitely pay down the loan. You won't be able to earn 7.75% interest anywhere, aside from stocks/mutual funds, but they carry a higher risk. There is no reason to keep that mortgage around if you can pay it off. Once you do that and have your emergency fund in place, you can think about investing.

poundwise · #3 (**permalink**) 01-17-2007, 08:34 PM

I agree with Safari. Given that set of circumstances, I would definitely pay that loan.

ren · #4 (**permalink**) 01-17-2007, 10:36 PM

Question -- do you have an emergency fund in addition to the $20,000 or is that your whole cash reserve? If it's the latter, I'd probably only use $15,000 and keep $5,000 back for a rainy day.

LuxLiving · #5 (**permalink**) 01-18-2007, 09:54 AM

somewhat relevant article
http://www.bankrate.com/nltrack/news...ortgage_a1.asp

creditcardfree · #6 (**permalink**) 01-18-2007, 12:09 PM

Honestly, if I were in your situation I probably would pay the house down...just to get it off my back.

However, I think you really could go either way. I actually need more information from you to give you a really good answer. Do you have money to invest into retirement right now, or is the mortgage payment keeping you from doing that? What is your current mortgage payment and length left on the loan?

If the mortgage payment is keeping you from investing now then you need to pay off the house and start investing for retirement with the money that has been going to the mortgage and any other money you can find. Part time job, selling items on ebay, or garage sale, ect.

If you are already investing and the mortgage has a short term left on it...less than 5 years...then I think I would use the 20K to fund your roth and wifes roth for 2006 and 2007 ($16000). Maybe even hold some for 2008 if you've already invested in the roth for 2006. I might then stop investing in your 401k, for a short time to get the mortgage paid off.

These are just ideas and options and simply my opinion and way of looking at things.

Good article, Lux!!

TURTLEDOVE · #7 (**permalink**) 01-18-2007, 07:36 PM

Besides The Arm Loan That I Was Asking About I Also Have A 30 Year Fixed Loan At A 4.50% With A Balance Of 130,000. In Other Words I Have An 80/20 Split Mortgage. Yes I Am Currently Contributing 400 Dollars A Month To Retirement Funds But No I Dont Have Any Big Cash Reserve For Emergencies. After Reading All The Advice I Recieved From People I Believe I Will Pay Off The Loan And Invest The Payment Every Month Going Forward. Thank You Very Much For Your Help I Greatly Appreciate It.

creditcardfree · #8 (**permalink**) 01-19-2007, 11:43 AM

Glad we could help. Best wishes for a growth in your retirement. You may still think about getting an emergency fund started. Rainy days happen to everyone.

sweeps · #9 (**permalink**) 01-19-2007, 01:36 PM

Isn't it cumbersome to capitalize every word when you type?

obAdvice: I do agree with the others to pay down the second loan.

PRICEPLUS · #10 (**permalink**) 01-19-2007, 03:05 PM

Late to the debate but I concur with the other folks here. Pay down the debt!

Gruntina · #11 (**permalink**) 01-19-2007, 05:03 PM

Quote:

Originally Posted by Sweepsplayer

Isn't it cumbersome to capitalize every word when you type?

obAdvice: I do agree with the others to pay down the second loan.

Some Word process programs have that setting and it may have been on default for that to happen unintentionally