racer254 Posted April 5, 2018 Share Posted April 5, 2018 Say I have 20 years left on a mortgage that still has 150,000 on it at 5% I have the 150g to pay it off. Do I pay off the house or invest the money somewhere else? Pros and Cons for anyone who cares to comment. Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member Highmark Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 (edited) 14 minutes ago, racer254 said: Say I have 20 years left on a mortgage that still has 150,000 on it at 5% I have the 150g to pay it off. Do I pay off the house or invest the money somewhere else? Pros and Cons for anyone who cares to comment. First and foremost I'm not an investment guru. Depends on many factors. Should be some decent calculators online about this but their accuracy depends on what actually happens in the future like deductability of the interest, tax rates and what not. On the surface I'd say you are better off keeping the mortgage and investing but it has to be looked at closely. For sure if investing I'd be maxing out a Roth with it. https://calcxml.com/calculators/pay-off-debt-or-invest Edited April 5, 2018 by Highmark Quote Link to comment Share on other sites More sharing options...
Snake Posted April 5, 2018 Share Posted April 5, 2018 How long to recoup savings if you pay off loan? Quote Link to comment Share on other sites More sharing options...
DriftBusta Posted April 5, 2018 Share Posted April 5, 2018 ASk RevKev STD...he’s a studious reader and has all the answers. 1 Quote Link to comment Share on other sites More sharing options...
racer254 Posted April 5, 2018 Author Share Posted April 5, 2018 1 minute ago, Highmark said: Depends on many factors. Should be some decent calculators online about this but their accuracy depends on what actually happens in the future like deductability of the interest, tax rates and what not. On the surface I'd say you are better off keeping the mortgage and investing but it has to be looked at closely. For sure if investing I'd be maxing out a Roth with it. I asked this to a few investment people and not many can really give me a straight answer. They say the same thing as you do. 150k over 20 years is another 82k in interest at 5% Quote Link to comment Share on other sites More sharing options...
racer254 Posted April 5, 2018 Author Share Posted April 5, 2018 7 minutes ago, Snake said: How long to recoup savings if you pay off loan? About 13 years or so if the mortgage payment goes right to savings to get back to 150k Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member steve from amherst Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 (edited) 3 minutes ago, racer254 said: I asked this to a few investment people and not many can really give me a straight answer. They say the same thing as you do. 150k over 20 years is another 82k in interest at 5% $ 549,143 Is investment income over 20 yrs . $150,000 initial deposit , $ 0 contributions , based on 8 % annual return. https://www.daveramsey.com/smartvestor/investment-calculator Edited April 5, 2018 by steve from amherst Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member Highmark Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 (edited) 7 minutes ago, racer254 said: I asked this to a few investment people and not many can really give me a straight answer. They say the same thing as you do. 150k over 20 years is another 82k in interest at 5% $150K at 8% ends up being around $550K in 20 years. If all gains are taxed you would have taxes on $400K in gains so figure around 20% LTCG or $80k tax rates stay relatively the same. Leaves $320K left over. Good mutual fund or index fund should get you 8% return. Use some of the online calculators. Do you know your marginal or effective tax rates? All these calculations go out the window if you start dipping heavily into that pond. Edited April 5, 2018 by Highmark Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted April 5, 2018 Share Posted April 5, 2018 31 minutes ago, racer254 said: Say I have 20 years left on a mortgage that still has 150,000 on it at 5% I have the 150g to pay it off. Do I pay off the house or invest the money somewhere else? Pros and Cons for anyone who cares to comment. given current market valuations, loss for many of the benefits of the interest being tax deductible it would really take some analysis to decide including accounting for your risk tolerance and any tax ramifications of rolling out of current investments to fund the payoff. Certainly historical average return of the market would be greater than the 5% interest cost but there is a piece of mind of being debt free. Quote Link to comment Share on other sites More sharing options...
racer254 Posted April 5, 2018 Author Share Posted April 5, 2018 6 minutes ago, steve from amherst said: $ 549,143 Is investment income over 20 yrs . $150,000 initial deposit , $ 0 contributions , based on 8 % annual return. https://www.daveramsey.com/smartvestor/investment-calculator I like that site. 150k at 5% gets me to 248k I always thought it would be better to just pay of the house vs ~233k that I would pay for the mortgage in 20 years. Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member Highmark Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 Just now, Angry ginger said: given current market valuations, loss for many of the benefits of the interest being tax deductible it would really take some analysis to decide including accounting for your risk tolerance and any tax ramifications of rolling out of current investments to fund the payoff. Certainly historical average return of the market would be greater than the 5% interest cost but there is a piece of mind of being debt free. The interest deduction threshold change is pretty high but needs to be taken into consideration. All good points though. Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member Highmark Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 (edited) 1 minute ago, racer254 said: I like that site. 150k at 5% gets me to 248k I always thought it would be better to just pay of the house vs ~233k that I would pay for the mortgage in 20 years. How much a month can you (and would you) put away/invest if you paid it off? Edited April 5, 2018 by Highmark Quote Link to comment Share on other sites More sharing options...
racer254 Posted April 5, 2018 Author Share Posted April 5, 2018 1 minute ago, Angry ginger said: given current market valuations, loss for many of the benefits of the interest being tax deductible it would really take some analysis to decide including accounting for your risk tolerance and any tax ramifications of rolling out of current investments to fund the payoff. Certainly historical average return of the market would be greater than the 5% interest cost but there is a piece of mind of being debt free. Yep, and it's a guaranteed 83k on the mortgage payoff Quote Link to comment Share on other sites More sharing options...
Dave Posted April 5, 2018 Share Posted April 5, 2018 Debt free is better imo. 1 Quote Link to comment Share on other sites More sharing options...
T1R9sledder Posted April 5, 2018 Share Posted April 5, 2018 (edited) Give the $150K to the T1R9 Sledder retirement fund, You'll feel better after you do it. Edited April 5, 2018 by T1R9sledder Quote Link to comment Share on other sites More sharing options...
racer254 Posted April 5, 2018 Author Share Posted April 5, 2018 Just now, Highmark said: How much a month can you (and would you) put away if you paid it off? That's the biggest question. I just figured the mortgage payment. Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member steve from amherst Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 Just now, Highmark said: How much a month can you (and would you) put away if you paid it off? That's another thing to keep in mind. Will you save/ invest the monthly savings if paid off. Or just live a higher lifestyle. Do you have to discipline to do so? Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted April 5, 2018 Share Posted April 5, 2018 9 minutes ago, Highmark said: $150K at 8% ends up being around $550K in 20 years. If all gains are taxed you would have taxes on $400K in gains. Use some of the online calculators. Do you know your marginal or effective tax rates? hard to accurately calculate the taxes, between different rates on dividends, short and long term gains and evolving tax rates you just need to take a WAG at those numbers. Quote Link to comment Share on other sites More sharing options...
racer254 Posted April 5, 2018 Author Share Posted April 5, 2018 Just now, steve from amherst said: That's another thing to keep in mind. Will you save/ invest the monthly savings if paid off. Or just live a higher lifestyle. Do you have to discipline to do so? Yeah, I do have the discipline. Quote Link to comment Share on other sites More sharing options...
Dave Posted April 5, 2018 Share Posted April 5, 2018 Just now, racer254 said: Yeah, I do have the discipline. You could be dead in 20 yrs...pay it off. 1 Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted April 5, 2018 Share Posted April 5, 2018 3 minutes ago, Highmark said: The interest deduction threshold change is pretty high but needs to be taken into consideration. All good points though. depends on the state you live in. With no income tax here and a sub 3% mortgage rate even with a 9k property tax bill I will be taking the new standard deduction. I've played this scenario he is asking for that reason and honestly there is no cut and dry answer to it. Using Ramsey's calculator is kind of funny given he would be a guy to tell you to get it paid off ASAP Quote Link to comment Share on other sites More sharing options...
Angry ginger Posted April 5, 2018 Share Posted April 5, 2018 1 minute ago, DAVE said: You could be dead in 20 yrs...pay it off. what does that have to do with anything. hell if i knew when i was going to die i would leverage myself to the hilt and blow it on hookers and blow because who really gives a fuck when your not going to have to pay it back. 2 Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member steve from amherst Posted April 5, 2018 Platinum Contributing Member Share Posted April 5, 2018 1 minute ago, Angry ginger said: depends on the state you live in. With no income tax here and a sub 3% mortgage rate even with a 9k property tax bill I will be taking the new standard deduction. I've played this scenario he is asking for that reason and honestly there is no cut and dry answer to it. Using Ramsey's calculator is kind of funny given he would be a guy to tell you to get it paid off ASAP I was wondering about that. Quote Link to comment Share on other sites More sharing options...
ArcticCrusher Posted April 5, 2018 Share Posted April 5, 2018 6 minutes ago, DAVE said: Debt free is better imo. He is. Quote Link to comment Share on other sites More sharing options...
Dave Posted April 5, 2018 Share Posted April 5, 2018 Just now, Angry ginger said: what does that have to do with anything. hell if i knew when i was going to die i would leverage myself to the hilt and blow it on hookers and blow because who really gives a fuck when your not going to have to pay it back. I knew you would say that. Still not owing is always better imo. Quote Link to comment Share on other sites More sharing options...
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