Pay off or invest

[kri$ten]

In a nutshell:
I owe 11,192 on my mortgage with 4.5% int (P&I 267.75). I have 16k combined sitting in my checking/savings account because I'm not sure what to do with it. Should I pay more towards my mortgage or invest? I'm nervous about investing because I don't know the first thing about it. I still plan on keeping around 9k for an emergency fund.

Details:
I'm 35 and have been focusing on debt up until now. I have about 13K in a 401k, and only 2k in a Roth IRA. Over the past 12 months my income ranged from 2000 to 3500/month (with an average of 2900). My expenses are 1500 including mortgage, property taxes, HOA, insurance, gas, utilities, groceries, etc.

You all were such a help last time I posted for advice. Since then I have gotten my debt way down. Thanks!

[DebtFree&Broke]

I would payoff your mortgage first, your so close Then talk to a good investment adviser (check out https://www.daveramsey.com/elp/investing/ictid/rt.nav)

[disneysteve]

I would not pay off the mortgage. At 35, I'd say it is more important to catch up on your retirement savings. Keep the 9K EF. Then take 5K and make your 2012 Roth contribution.

What percentage of income are you putting into your 401k currently?

You say you've gotten your debt "way down." What does that mean exactly? Do you still have debts other than the mortgage? If so, that might change my answer.

[bjl584]

You may want to look into a refi before you consider paying it off.

It looks like that may be a better option. Then you can catch up on retirement.

[kri$ten]

The mortgage is my only debt. I paid off my car and don't use CC.

[bjl584]

The mortgage is my only debt. I paid off my car and don't use CC.

I'd either continue to pay the mortgage as normal or look into a refi and see if it is worth it. Then i would use my extra money to save and invest.

[kri$ten]

I'd either continue to pay the mortgage as normal or look into a refi and see if it is worth it. Then i would use my extra money to save and invest.

I refi-ed two years ago and was told that since it's a rental property I had to do a 15 yr term (possible it was only for that specific lender, I'll look into it.)

Thanks everyone for your input! I really appreciate it.

[greenskeeper]

I'd pay of the mortgage if I was in your position.

In fact, when the day comes that I can write a check to pay it off it is a done deal.

[sblatner]

We paid off our mortgage last fall and have never regretted it. I'd pay off the mortgage and keep the same spending habits as before...start rebuilding your emergency fund to 6-8 months and step up your retirement.

Congratulations on either decision. Your mortgage will be paid off soon enough even if you don't pay it off in one fell swoop. Ours got so low, we just couldn't stand not paying it off.

[jteezie]

I agree with disneysteve. at your age, the compound growth of tax sheltered roth ira money outweighs paying off the house

[jpg7n16]

Well let's see

Debt situation: little to none and that little bit is at a low interest rate. (Very strong)

Retirement situation: Weak. You would hope to have about an amount equivalent to 67-100% of your income by now.


I think it's better to use the funds to shore up a weakness, than to increase a very strong strength.

[snafu]

You're up-to-date on your mortgage and behind on your retirement contributions. Do you get an employer match? I'd contribute to get the maximum match. I'd Dollar Cost Average [DCA] in a low cost Management Expense Ratio, low transaction fee Mutual Fund.

[personalfinanceohio]

I would pay off your mortgage first. imo it's usually better to pay off debts first. You have time to catch up with your retirement.

[Goldy]

Do Both! I would make sure I maxed the 2012 Roth with 5k and would toss 2k at the home which would still leave you with 9k in the bank.

[luckyzimmy]

Ask Ric.

You hear Ric Edelman ads all the time on the radio, and you might look at his website
He is a big time adviser, and recommends a large mortgage for everyone.

Your real question is mathematical. If you can earn more than by paying off the mortgage by investing elsewhere, keep the mortgage. If the property is a rental, you need interest expense to buffer the rental income to keep your tax bill down.

Congratulations on your debt reduction program.

There is a way to save money tax efficiently that is much better then a roth IRA, is safer and one that you will be delighted with in a few years. Let me know if you would like more info.