pay off mortgage or save?

**humandraydel** · 03-16-2014, 01:44 PM

At 3.25% it is debatable if you should pay it off. Are you able to deduct any mortgage interest? That would push your rate down even further. Personally, at that interest rate I would not pay it off. I'd invest the money, first in any tax advantaged accounts and then in a taxable account.

**rockrv22** · 03-16-2014, 02:13 PM

I can rite off a little interest but not much.

**humandraydel** · 03-16-2014, 03:51 PM

The idea is that if you were to invest that money in a taxable account with a 70/30 stock/bond mixture, you would likely earn an average of 6-7% per year. Since you are only paying 3.25% per year, numerically it will benefit you to invest instead of pay off the debt. Another way to look at it is that 3.25% is probably close to the inflation rate - so 10 years from now that payment will look small and you could have plenty of money in the bank. Of course, if psychologically, you feel a strong desire to pay off the loan, that's okay too. But personally, I would prefer to have $100k in the bank and $100k on a 15 year loan. If you WERE to lose your job, that $100k in the bank will pay the 15 year loan for 6-8 years.

**snafu** · 03-16-2014, 05:54 PM

When you check the figures, how much of your monthly payment goes to principal and how much goes to interest? I'm asking to bring to your attention the fact that unlike regular, simple interest loans, mortgage amotorization tables are front loaded. In the early years you can save yourself a lot of interest by making extra payments directly to principal. It is likely you could do as well splitting $ 1,000. between low cost, no fee Index, Foreign, Corporate Bond MFs 2/3, 1/3, 1/3 on Dollar Cost Averaging [DCA] system. If you re-allocate twice a year, you could move the profit to your mortgage, add your tax rebate, any Snowflakes and half of any bonus or salary increase to the mortgage principal. It depends on how focussed you wish to be.

You're in a terrific place, lots of choices

**feh** · 03-17-2014, 06:14 AM

I'd want to know how much you have saved for retirement, and how much you are saving each year before responding.

**rockrv22** · 03-17-2014, 10:29 AM

Just over $30000 in Ira and put in $300 a month

**feh** · 03-17-2014, 10:31 AM

Originally posted by rockrv22 View Post

Just over $30000 in Ira and put in $300 a month

I suggest you pay the mortgage on schedule and save all you can for retirement.

**sniper260** · 03-24-2014, 08:13 AM

Yep, I would probably invest all I can and keep the house payment... the time value of money is what is going to work for you... if you have an investment making more money than your are loosing to interest on the house... your still making more money... play with a time value of money calculator.

pay off mortgage or save?