Author Topic: Pay off a mortgage or invest/  (Read 1880 times)

CT

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Pay off a mortgage or invest/
« on: December 15, 2013, 10:48:49 PM »
I am new to MMM site & cannot stop reading—even though most of it is over my head.  Personal finances have always been a huge challenge for my husband and I.   And now that we finally have some money to invest, we haven’t a clue what to do with it. 
In a nutshell, here is my husband’s and my situation.  We are currently empty nesters & retired; my husband stopped working in 1997 age 41(now 57) due to medical issues, I (now 48) only ever worked part-time, but stopped working 2 yrs ago.  Our income is Social Security Disability and we live comfortably. Our only debt is the house.  At the end of the month we have between $500 & $700 left over.   My question is what should we do with the money?  Husband wants to spend it, (not going to happen because I control the money) but I am torn between paying off our mortgage and investing.  Our current loan rate is 2.25%, our payment is $871/month (which includes taxes & homeowners insurance).  Would investing be better for us?  We live in California. For the last 2 years we owed/paid no state or federal income taxes.  Would an investment be worth the new taxes & interest we pay on the mortgage?   My thinking is that years down the road we may need more money simply because the older we get the less we can do on our own.  Then there is inflation & who knows what is going to happen to health insurance in the states.

ShortInSeattle

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Re: Pay off a mortgage or invest/
« Reply #1 on: December 16, 2013, 12:03:01 AM »
Are the following assumptions true?
1. You have a stable "guaranteed" income.
2. You have a fixed rate mortgage at a low rate of interest.
3. You forsee having extra expenses in 10+ years.

In that situation I would invest regularly in low cost funds.  Perhaps set aside 10% of your surplus into a "fun money" account to keep the hubs happy.


marty998

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Re: Pay off a mortgage or invest/
« Reply #2 on: December 16, 2013, 12:25:05 AM »
How big is the mortgage? I would pay it off if I were you. Nothing beats the security of knowing you own the roof over your head and no one can take it away from you.

You must be doing something right. Down here in Aus anyone who can live comfortably on a disability pension is either lying or cheating the system.

dadof4

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Re: Pay off a mortgage or invest/
« Reply #3 on: December 16, 2013, 01:36:36 AM »
Are the following assumptions true?
1. You have a stable "guaranteed" income.
2. You have a fixed rate mortgage at a low rate of interest.
3. You forsee having extra expenses in 10+ years.

In that situation I would invest regularly in low cost funds.  Perhaps set aside 10% of your surplus into a "fun money" account to keep the hubs happy.
By her wording, as well that interest rate, I'd assume that it was a variable rate mortgage. In that scenario, they need to make sure their fixed income would cover a higher interest rate - probably up to 8%. If they already have $700 extra, and with their disability payment rising with inflation but their loan amount staying constant, it's probable that they should still be in the clear.

I'd triple check those figures with your actual numbers though.

If you don't have any money that is accessible - I'd invest your extras for the next few years at least. Having flexibility is important, and you'll come out ahead on average.

CT

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Re: Pay off a mortgage or invest/
« Reply #4 on: December 16, 2013, 02:46:24 AM »
To clarify.  The income is stable. The mortgage is fixed at 2.2% (a special financing VA loan).  As far as foreseeable future expenses--that's just it--no way to predict.  We never thought he would have health issues in the first place.  I am just figuring that we may need more money in the future in case we can no longer do our own house repairs, grow or own food or if we need a care takers help. 
Things are comfortable now is because we always lived way below our means through the working years, so conserving is just a way of life. We also had savings that got us through until disability was finalized. The kids being on their own frees up a fairly big chunk.  Our home has solar energy so the electric co. actually sends us a check once a year. All this and more (like no cable/data plans) keep our monthly expenses very low and thus the surplus.