Pay off the house... good idea

[greenskeeper]

Great point. However, if you invest in a reasonably priced index fund which tracks the whole market, well the entire stock market has returned somewhere in the neighborhood of 10-11% nominally since 1929 through 2009. Throw some bonds in there and it's fair to say you will get about 8% each year on average with a long investing horizon.

The mistaken assumption here is that paying off the house is a guaranteed saving. What about inflation? If we see a lot of inflation in the next few years, which wouldn't shock me given what the Fed is doing, that loan would become cheaper relative to everything else since stocks, earnings, etc. tend to keep up with inflation for the most part. One could argue that this would be a loss in a sense, since the loan would be devalued, and paying it off later would have been cheaper.

Either way it really boils down to both options being good ones. There's no certainty in life...the moment we try to convince ourselves there is, that's about when life is going to bite you in the ass.

money supply has gone parabolic since QE began

if inflation occurs then the "paid in full" house is worth more in terms of dollars (market price)

[PatientSaver]

I am single and 52. I paid off my mortgage early a few weeks ago (in year 17 of a 30-year loan) and don't regret it.

I an underemployed currently and was seeking to reduce my monthly expenses, so i took it out of savings/mutual fund investments.

Keep in mind that you will need to be disciplined to invest/save each month the amount you would otherwise have paid toward the mortgage. It is too easy to let it slip. I would put it on auto-pilot. It is a wonderful opportunity: don't blow it.

I only wish I could have done that and accelerated my retirement savings; instead, not having worked full-time/perm since 09/2009, the mortgage payoff will only help me squeak by in meeting expenses while I continue my search for work. I had THOUGHT years ago that an early mortgage payoff would put me on "easy street," financially.

[daddiorick]

The issue has changed. We are no longer considering paying off the current house. The reason is as stated above, we have decided to move with our son and family (3 grands) from the Atlanta area where we currently live to Charleston, SC.

The question now is what to do with the Atlanta home in which we have lived all of 4 months. :-) If we sell we walk away with somewhere between $4-9k in clear profit. The house had been a foreclosure that we bought right and then upgraded. That profit figure includes commission and capital gains (which we will need to pay).

If we rent out the home we could get about $1200/month. Current mortgage payment on the Atlanta home is about $800/month. So we would have positive cash flow. We estimate rent in Charleston to run about $12-1300/month. So if we rent it is pretty much a wash except that property management in Atlanta would cost us a month's rent for finding a tenant and then 10% of the monthly.

But what do people think? Sell the house and buy in Charleston feels about right to me. We have scouted the area and know where we want to locate. So we are thinking sell here and buy there. But I thought I would put the question to people here. Thanks.

[AccountantSalary]

I think most financial advisers would encourage you NOT to pay off the house and put your money to work in other ways.

As for me, I paid off the house a few years ago as soon as I could. It's a major chunk of my monthly budget gone, and I've been able to save a lot of the money that would've gone into the mortgage.