Author Topic: Mortgage vs Investments?  (Read 3170 times)

mumbly_joe

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Mortgage vs Investments?
« on: June 26, 2014, 11:23:01 AM »
Hi there - sorry if this has been addressed, I've hunted through the articles but can't find one that addresses this specifically.

My stache is roughly 400k, with 100k in stocks and 300k in real estate (the house I live in and 1 rental), both of which have mortgages around 4.3%.  Where should I be putting my savings each month, in to savings or paying off the mortgage?   

The financial planner guy my wife convinced me to see made a (to me) persuasive-sounding argument as to why I should be putting everything I save straight into savings, but the Mustachian view (I think) is to pay off the mortgage before padding the index fund account.  Is there an article as to why?  Or am I mistaken?

ivyhedge

  • Bristles
  • ***
  • Posts: 290
  • Location: United States of Farse
Re: Mortgage vs Investments?
« Reply #1 on: June 26, 2014, 11:31:53 AM »
The financial planner guy my wife convinced me to see made a (to me) persuasive-sounding argument as to why I should be putting everything I save straight into savings, but the Mustachian view (I think) is to pay off the mortgage before padding the index fund account.  Is there an article as to why?  Or am I mistaken?


Are you already contributing the maximum amount to your 401(k)/403(b) (and ROTHs for both of you, if applicable)?

SunshineGirl

  • Pencil Stache
  • ****
  • Posts: 768
Re: Mortgage vs Investments?
« Reply #2 on: June 26, 2014, 11:34:14 AM »
The financial planner benefits if you invest rather than pay toward the mortgage. Keep that in mind.

This is a question that gets discussed endlessly on the forums. Many factors come into play, and in the end, what's best is what lets you sleep well at night. For me, it's a paid-off everything. For arebelsby, it's the exact opposite. I'm happy with my decision; he's happy with his. The real point is to spend far less than you earn, have a plan, and follow the plan. Many roads to get to the same place, etc.

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 4918
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Mortgage vs Investments?
« Reply #3 on: June 26, 2014, 11:52:41 AM »
I'd look into refinancing to 15 year mortgages at ~3.3% but otherwise dump your money in stocks. You have a 75/25 allocation into real estate. Paying off the mortgage reduces your mortgage costs but you'd be better "diversified" if you had more in stocks, so I'd put your investable income into stocks going forward.

AssetGrinder

  • Stubble
  • **
  • Posts: 114
  • Location: Victoria BC Canada
    • Asset-Grinder Finance Blog
Re: Mortgage vs Investments?
« Reply #4 on: June 26, 2014, 11:55:14 AM »
With a 4.3% loan rate you should pay that off first. 4.3% guaranteed return is great if you were to invest it it so it only makes sense to pay off your home. Leave yourself a lil bit of cash for a few month emergency fund.

Best of luck!

fixer-upper

  • Bristles
  • ***
  • Posts: 255
  • Location: Wisconsin
Re: Mortgage vs Investments?
« Reply #5 on: June 26, 2014, 12:50:14 PM »
In order to come out ahead investing, you'd need to earn more than 4.3% plus taxes plus trading costs plus enough to offset the risks involved in both investing and leveraging your home to do so.

When you add all that up, paying off the house note tends to be a much more sensible option.


 

Wow, a phone plan for fifteen bucks!