Pay off house or invest the $ ?

Kelvin said:
What does your wife say?
Click to expand...
My wife of 8 years is uber conservative & has always been a big saver. She is 10 years younger than I so that's another factor in the equation. She will most likely out-live me. Probably not that hard to do actually.

When we began discussing this matter recently, her vote was to invest the money & use my quarterly bonuses to pay the mortgage down. She calculated we could pay it off in two years depending on my bonus amounts. Some quarterly bonuses are quite small but some can be quite large. It all depends on crop prices & sales.

You've all been very instructive but we decided today that we would pay off the house in April. I anticipate some good extra income by then & a decent tax refund.

I appreciate all of the input.
 
kyleb said:
I look at this differently. If the housing market crashes, you still own a house, at whatever value it has. If the market crashes, you still own pieces of companies that have value - assets, employees, brands, products, etc. Those assets don't go away, despite however the market may value them. So when the market comes back (on the house or the equities), so does your value.
Click to expand...
But your house has a practical value. Your stocks don't. Even if the value in your house never comes back or comes back too slowly for your timeframe, you still have a place to live. I never cared what my house was worth until I got ready to sell it. I think over 25 years the value went up fairly quickly at first, stagnated for a long time, then picked up in the last two years.

That said, I wouldn't pay off a house unless I had plenty of other cash. In my case, the mortgage balance wasn't that large and the interest rate was fairly high.
 
saddletramp said:
My wife of 8 years is uber conservative & has always been a big saver. She is 10 years younger than I so that's another factor in the equation. She will most likely out-live me. Probably not that hard to do actually.

When we began discussing this matter recently, her vote was to invest the money & use my quarterly bonuses to pay the mortgage down. She calculated we could pay it off in two years depending on my bonus amounts. Some quarterly bonuses are quite small but some can be quite large. It all depends on crop prices & sales.

You've all been very instructive but we decided today that we would pay off the house in April. I anticipate some good extra income by then & a decent tax refund.

I appreciate all of the input.
Click to expand...

Ah see, now more info comes to light, your wife is a smart lady, pay attention to her.
 
saddletramp said:
You've all been very instructive but we decided today that we would pay off the house in April. I anticipate some good extra income by then & a decent tax refund.

I appreciate all of the input.
Click to expand...

Sounds like y’all have made a wise and well-informed decision. Congratulations.
 
Chip Sylverne said:
There is a new crisis coming
Click to expand...

The statistics of stock market declines:
(aren't they often associated with recessions?)

Average time between recessions since WWII: ~6 years (73yrs/12rec). (Perhaps greater periodicity lately)
Maximum time between recessions = 10 years. 1990-2000
Our last recession was 2008 =11 years ago.
Can this be used at all to narrow down "when" for the next one?
Go into cash now; lose the opportunities presented, as the DJIA goes 25K-->30K?

http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
 
ya but....you won't know we're in one....till we're in one. :D

....and you should prolly sit this rally out. o_O
 
Last edited:
Let'sgoflying! said:
Go into cash now...
Click to expand...

That may turn out to be good advice.

Or not.

I’ve heard that advice since the 1980’s. And when the Dow hit 10k. And at every “threshold” that it broke through since then.

The time to get out is always perfectly obvious - problem is it’s only so in retrospect.

Trying to “time” one’s exit, and then reentry into the market, has a chance of working. Key word: chance. Historically, just staying in and continuing to invest in up and down markets outperforms virtually all attempts to “time” markets based on all the historical data you provided or whatever scheme or technical analysis one wishes to adhere to.

But if cash makes one more comfortable, they should for it. If you think now’s the time to liquidate holdings, go for it. But remember that cash has a negative return, that being the inflation rate. And don’t fail to consider that 15% hit you take on long term capital gains when you sell.
 
Let'sgoflying! said:
The statistics of stock market declines:
(aren't they often associated with recessions?)

Average time between recessions since WWII: ~6 years (73yrs/12rec). (Perhaps greater periodicity lately)
Maximum time between recessions = 10 years. 1990-2000
Our last recession was 2008 =11 years ago.
Can this be used at all to narrow down "when" for the next one?
Go into cash now; lose the opportunities presented, as the DJIA goes 25K-->30K?

http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
Click to expand...

I'm not advocating staying out of the market, or getting in the market. What I'm advocating is be wary. If you look at your stats, you'll find most stock market gains take place in short concentrated bursts between long periods of sideways price action. Therefore time in the market beats timing the market, and does best when coupled with dollar cost averaging vs. going all in all at once.
The one thing not mentioned in the current runup is that the dollar has declined almost 20% over the past year. Industrial capacity is still only around 77% and flat. Stock prices are rich, and not being driven by earnings, yet anyway. Lots of foriegn money coming in, keeping interest ratrs low. Contrary to what some might have you believe, lack of cash to invest in productive capacity isn't our problem with jobs and wage growth.
 
Last edited:
FastEddieB said:
That may turn out to be good advice.

Or not.

I’ve heard that advice since the 1980’s. And when the Dow hit 10k. And at every “threshold” that it broke through since then.

The time to get out is always perfectly obvious - problem is it’s only so in retrospect.

Trying to “time” one’s exit, and then reentry into the market, has a chance of working. Key word: chance. Historically, just staying in and continuing to invest in up and down markets outperforms virtually all attempts to “time” markets based on all the historical data you provided or whatever scheme or technical analysis one wishes to adhere to.

But if cash makes one more comfortable, they should for it. If you think now’s the time to liquidate holdings, go for it. But remember that cash has a negative return, that being the inflation rate. And don’t fail to consider that 15% hit you take on long term capital gains when you sell.
Click to expand...


If you really think a crash is imminent, I recommend investing in precious metals. Primarily brass and lead.

I agree that timing entry and exit is difficult if you're trying to be exact and milk every possible dollar, but being a bit conservative has worked for me. If you err on the side of getting out a little too early and getting back in a little too late, you'll come out way ahead of missing it the other way around.
 
I had to make this decision recently. We had 8 years remaining @4.00%. I paid it off. Now debt free and I'm determined to pay cash for everything from now on. The piece of mind was worth it.
 
saddletramp said:
My wife of 8 years is uber conservative & has always been a big saver. She is 10 years younger than I so that's another factor in the equation. She will most likely out-live me. Probably not that hard to do actually.

When we began discussing this matter recently, her vote was to invest the money & use my quarterly bonuses to pay the mortgage down. She calculated we could pay it off in two years depending on my bonus amounts. Some quarterly bonuses are quite small but some can be quite large. It all depends on crop prices & sales.

You've all been very instructive but we decided today that we would pay off the house in April. I anticipate some good extra income by then & a decent tax refund.

I appreciate all of the input.
Click to expand...
What is this "tax refund" of which you speak? These are strange words.
 
Half Fast said:
If you really think a crash is imminent, I recommend investing in precious metals. Primarily brass and lead.

I agree that timing entry and exit is difficult if you're trying to be exact and milk every possible dollar, but being a bit conservative has worked for me. If you err on the side of getting out a little too early and getting back in a little too late, you'll come out way ahead of missing it the other way around.
Click to expand...
Yep; "Pigs get fat, hogs get slaughtered."
 
MadseasoN said:
I had to make this decision recently. We had 8 years remaining @4.00%. I paid it off. Now debt free and I'm determined to pay cash for everything from now on. The piece of mind was worth it.
Click to expand...
If you had enough cash to pay it off, why pay it off under those terms? Hopefully you didn't deplete the reserves.
 
bflynn said:
I haven't seen it mentioned, so I will add this - in a few years you will probably want to retire if you haven't already. Pay off your house in the next few years and you can enter retirement with no mortgage.

You can do a lot of flying on $1700 a month.
Click to expand...
If you have the cash flow to service the note, then why reduce your investable or emergency cash holdings?
 
Financially, there isn't much of an argument that it's better to pay off a low interest mortgage. I look at it where the decision is whether the peace of mind of having no mortgage is worth more to you than the financial gain of continuing to carry the mortgage. For some it is, for some it's not.
 
paflyer said:
If you had enough cash to pay it off, why pay it off under those terms? Hopefully you didn't deplete the reserves.
Click to expand...

He said it right in his post: The piece of mind was worth it. It suggests that he weighed the options and decided that he values being debt free higher than having a cash reserve/investments + debt.
 
paflyer said:
If you have the cash flow to service the note, then why reduce your investable or emergency cash holdings?
Click to expand...

Because once us old farts pass ~50, the warranty on our bodies expires and the probability of having a medical issue prior to age 70 goes up quite a bit. This is a personal decision that has to be made considering factors other than the purely financial. The probability of maintaining that cash flow goes down as we get older.

Example - a few years ago a good friend, in his late 50s and excellent physical health, learned his wife had a permanent and worsening condition that caused seizures. Her doctor told him she might have 4 or 5 good years left, beyond which she would require greater and greater care. Although he had planned to work another 10 years, he was debt free and in a good financial position. He retired immediately so they could travel and enjoy a few years together.

Situations like this become more and more of a consideration as we age. It may be wise to position yourself for flexibility in a planned retirement date, and retiring debt as we enter our senior years can help with that.
 
Your friend only shifted the balance in his net worth. I have the flexibility to either pay it off in 5 minutes or just let it ride. I'd rather keep the cash available for the kind of situation your friend sadly encountered.


In my case, taxes and insurance far outweigh the principal & (deductible) interest in the monthly nut. Personal tax situation is another big variable in the decision.
 
Ok, let's turn this around. How many advocate borrowing against their home to put money in the market? Or maybe go to Vegas? Hint...there are no guaranteed returns either place. If you believe there are, you haven't lived long enough.
 
Half Fast said:
Example - a few years ago a good friend, in his late 50s and excellent physical health, learned his wife had a permanent and worsening condition that caused seizures. Her doctor told him she might have 4 or 5 good years left, beyond which she would require greater and greater care. Although he had planned to work another 10 years, he was debt free and in a good financial position. He retired immediately so they could travel and enjoy a few years together.

Situations like this become more and more of a consideration as we age. It may be wise to position yourself for flexibility in a planned retirement date, and retiring debt as we enter our senior years can help with that.
Click to expand...

I was in a big hire group my first engineering job out of school, and not long after that the company had a big layoff and got rid of a bunch of mid-50's engineers. This was a company that up until then didn't have layoffs, and these guys were caught off guard. They had mortgages, debt, kids in college, etc., and no real local job opportunities. I saw some of these guys literally start to sweat after getting the news. It was rough.

And, I've seen this pattern repeat as I've moved through my career: A bunch of new guys are hired on the cheap and the old expensive mid-50's guys get the axe. I vowed that by the time I was in my mid-50's I'd have a paid for house, be dept free, and have an ok rainy day fund. I ain't gonna be that guy...
 
paflyer said:
I have the flexibility to either pay it off in 5 minutes or just let it ride. I'd rather keep the cash available for the kind of situation your friend sadly encountered.
Click to expand...


Then you're not depending on future cash flow to pay a mortgage and I assume you're using very liquid investments presumably with low volatility. If you can do that and still get better yield than your mortgage rate, it's not a bad option. If it's cash sitting in a bank account earning 0.5%, better to clear off the loan.

Everybody's life situation is different, and everybody has a different comfort level with risk, so the "best" approach may be different for each individual. IMHO, assets and investments should be providing the person with security and satisfying needs and wants. If the investment risks are above someone's comfort level and are causing undo worry and stress, the approach is wrong even if it's giving higher yields. If a mortgage is weighing on your mind and keeping you awake at night, pay it off and stop worrying about it even if it's not the perfect way to get the maximum return.

When I paid off my house a few years ago, what had been the house payment immediately became additional investment every month. BUT, I'm not obligated to make that investment, and if a crisis comes up I have a little more flexibility to handle it. The only bills I must pay these days are groceries, electricity, and taxes, and that's a very small nut to crack each month.

My wife and I are very comfortable in that position and enjoying life. Isn't that ultimately the point, after all?
 
paflyer said:
Your friend only shifted the balance in his net worth. I have the flexibility to either pay it off in 5 minutes or just let it ride. I'd rather keep the cash available for the kind of situation your friend sadly encountered.
.
Click to expand...

By putting cash into the house, he secured it for his own use after his spouse passes. Once you are looking at the prospect of nursing home bills investing in your home can be a good option. Medicaid will force you to 'spend down' your cash. They don't require you to sell or borrow against a primary residence.
 
Chip Sylverne said:
Ok, let's turn this around. How many advocate borrowing against their home to put money in the market?
Click to expand...

Anyone who can honestly answer that hypothetical also knows the answer to whether it makes sense to pay off early.
 
weilke said:
By putting cash into the house, he secured it for his own use after his spouse passes. Once you are looking at the prospect of nursing home bills investing in your home can be a good option. Medicaid will force you to 'spend down' your cash. They don't require you to sell or borrow against a primary residence.
Click to expand...
Well that's a specific strategy vs a basic "feel good" Dave Ramsey decision.
 
Chip Sylverne said:
Ok, let's turn this around. How many advocate borrowing against their home to put money in the market? Or maybe go to Vegas? Hint...there are no guaranteed returns either place. If you believe there are, you haven't lived long enough.
Click to expand...
No one would ever advocate betting the farm on the tables, but plenty of people do it to start a business. However, most likely those guys are several decades from living off the government teat.

I know someone who did that to buy a bunch of company stock at the "employee price", it took years to dig out when the value crashed.
 
I'll offer one last option if you're determined to get in the market with borrowed money. Pay off the house, invest what extra cash you have and add to your position "on margin" from your broker. If things work out and you picked winners, great, you've levered your investment and made some long dough. If not and your picks tank, then don't meet the margin call, forfeit your equity (smart $ never meets a margin call! You just add to your misery on the way down.) But you've still got a place to lay your heads debt free. I don't know what margin loans cost these days, but typically it's cheap $.
Lever using other people's money.
 
Last edited:
Bill Jennings said:
I was in a big hire group my first engineering job out of school, and not long after that the company had a big layoff and got rid of a bunch of mid-50's engineers. This was a company that up until then didn't have layoffs, and these guys were caught off guard. They had mortgages, debt, kids in college, etc., and no real local job opportunities. I saw some of these guys literally start to sweat after getting the news. It was rough.

And, I've seen this pattern repeat as I've moved through my career: A bunch of new guys are hired on the cheap and the old expensive mid-50's guys get the axe. I vowed that by the time I was in my mid-50's I'd have a paid for house, be dept free, and have an ok rainy day fund. I ain't gonna be that guy...
Click to expand...
I live in an area that has a LOT of engineers for one BIG company. Like your example, if this company shutdown or had massive layoffs all the sudden, there would be effectively no local jobs that these people could go to. The only reason most of them are here is because of this one company...many drive fancy cars and have expensive toys and nice houses. Just makes me wonder how many would truly be screwed if they were all the sudden told the company was shutting down and they wouldn't be getting a paycheck (admittedly, this is incredibly unlikely anytime soon not to mention their parent company is incredibly wealthy as well) and then how many would be able to weather the storm, or at least have the resources to move to a new job without skipping payments and what not. Just makes you think.
 
Chip Sylverne said:
Ok, let's turn this around. How many advocate borrowing against their home to put money in the market? Or maybe go to Vegas? Hint...there are no guaranteed returns either place. If you believe there are, you haven't lived long enough.
Click to expand...
well....it certainly couldn't be as bad as horse farming. :D
 
Checkout_my_Six said:
well....it certainly couldn't be as bad as horse farming.
Click to expand...

I admit, you may be on to something there...there are days when going to Vegas and putting it all on red has crossed my mind. Like every day of these last 2 weeks in the deep freeze.
 
You must log in or register to reply here.
Back
Top