Would you payoff mortgage if moving in 2 years?

[jIM_Ohio]

Consider options and facts-
1) What is home worth?
2) Where are you moving to? WHY?
3) When you move will you own or rent?
4) is the value of the house now going to trigger capital gains on uy itaxes when you sell?

options-
1) pay off house, sell house, buy a new one in new location
2) pay off house, rent house, rent in new location
3) pay off house, rent house, buy in new location
4) pay off house, sell house, rent in new location

options 5-8 are the same with NOT paying off house. Tell us which scenario.
I would recommend renting in new location if you are not familiar with it

[corn18]

That train has left the station.

Selling house in OH. Already bought home in TX. The question is whether to pay off the house in TX.

[veronak]

I’m late to the party but I say pay it off. If you don’t move the house is paid for, if you do, you get your money back (equity)

[corn18]

As an update, we are still discussing what to do. The money is starting to roll in. $200k came in last Friday. $100k this Friday. Another $100k arrives when we sell our OH house. And another $377k in July. We will have $777k sitting in a money market account earning 2% by the end of July. Mortgage balance is $579k.

I would like to make a decision and put it to work now either in the market or paying down the 3.875% mortgage. Sitting in a MM account is against my investment policy statement.

[creditcardfree]

As an update, we are still discussing what to do. The money is starting to roll in. $200k came in last Friday. $100k this Friday. Another $100k arrives when we sell our OH house. And another $377k in July. We will have $777k sitting in a money market account earning 2% by the end of July. Mortgage balance is $579k.

I would like to make a decision and put it to work now either in the market or paying down the 3.875% mortgage. Sitting in a MM account is against my investment policy statement.

If you put it in the market, how long until you need those funds? Two years? What would you invest in? Stocks would be risky if you need it in two years.

Remember it can be some in the house, some in investments, which I guess it would be that even if you paid house in full. I say pay it off. Good luck in your decision making!

[Jluke]

Can you recast your mortgage if you put a certain amount towards it ( don’t payoff).

May want to split up the cash in some way (70:30; 60:40) etc. investments:mortgage.

Investments could be stocks, CDs, money markets, bonds etc.

[corn18]

If you put it in the market, how long until you need those funds? Two years? What would you invest in?

Not sure, but could be as early as 2 years, which means don't put it in the market. As I see it, I can pay off the mortgage and earn 3.875% guaranteed or put it in a MM or bond fund and earn 2%. Seems fairly simple to me. Except for the liquidity part. I'll have enough liquid funds, so not sure why I am waffling.

Can you recast your mortgage if you put a certain amount towards it ( don’t payoff).

Yes. Mortgage is with Chase and they will recast for free. I'm leaning towards not recasting as I have plenty of cash flow and recasting resets the P to I ratio to unfavorable.

[Jluke]

What’s one fund that the bogleheads always recommend: Vanguard prime money market?

think it’s 2.4% or so

[MonkeyMama]

Corn, another point of view... Paying off a mortgage is not permanent. You can certainly always change your mind and leverage more against your home later, if you so choose. Maybe if you view it as a less permanent decision, it won't seem quite as scary. (Of course the exception is if you lose your income and can't take a new loan later. But for the most part, I think most people in your shoes with a paid off house, wouldn't choose to leverage it. Maybe just another way to think through it).

[corn18]

Corn, another point of view... Paying off a mortgage is not permanent. You can certainly always change your mind and leverage more against your home later, if you so choose. Maybe if you view it as a less permanent decision, it won't seem quite as scary. (Of course the exception is if you lose your income and can't take a new loan later. But for the most part, I think most people in your shoes with a paid off house, wouldn't choose to leverage it. Maybe just another way to think through it).

Very true. The way I look at it is simple:

1 Feb 2019: $800k in the bank, owe $573k on a house

1 Aug 2019: $1.07M in the bank, no debt at all

Seems like paying off the house is just our way of catching up to where we should have been had we not been stupid for 25 years. I've just been given the opportunity to make up for past mistakes in one lump sum.

[kork13]

Sounds like a win to me. As I see it, without a mortgage payment, you'll be able to cash flow a rapid return of liquidity. Besides, as MM said, you can always just get a new mortgage if you really hate the idea of being debt free. (LOL)

[disneysteve]

I can pay off the mortgage and earn 3.875% guaranteed or put it in a MM or bond fund and earn 2%.

There is at least one other option. You could buy a short-term CD. My mom got one last week for 13 months for 3.1% so better than the MM but less than the mortgage, and for 2 years you might be able to find an even better rate. There is still a liquidity issue but not as much as with the mortgage. You can always cash out a CD early if you want to and just sacrifice the interest penalty. Not saying that's what I would do but it is another possibility.

[creditcardfree]

There is at least one other option. You could buy a short-term CD. My mom got one last week for 13 months for 3.1% so better than the MM but less than the mortgage, and for 2 years you might be able to find an even better rate. There is still a liquidity issue but not as much as with the mortgage. You can always cash out a CD early if you want to and just sacrifice the interest penalty. Not saying that's what I would do but it is another possibility.

We have our cash down payment for our next home in CDs paying similar rates. The only issue may be finding enough of those great rates that don't also have a limit to how much you can put in. Hopefully, OP is also remembering that FDIC insurance limits and not keeping more than would be insured at one bank.

[scfr]

PurePoint is offering a 13-month no-penalty CD for 2.60% - If you withdraw the whole thing, you don't lose any of the interest.
More and more banks seem to be offering these types of CDs (no penalty).
A CD like that might be useful for anyone who can meet the $10K min, might need all of the funds before the CD matures, but would like to earn more than a MMA - for example, if you plan to buy a house but don't know exactly when.

(If you know for sure you can lock the money up for 13 months, there are better rates out there, like the one DisneySteve's mom got.)

[corn18]

For now, I am stashing everything in Fidelity FZDXX money market. It has a 7 day yield of 2.39%, which is about the same as my mortgage considering the tax break on interest.