Author Topic: To payoff the mortgage early or to save  (Read 616 times)

MrDollarBeardFace

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To payoff the mortgage early or to save
« on: February 03, 2020, 04:36:27 PM »
Slap me with a spoon but I am 43 and have just reached a point in my life where I have gotten out of a crippling mortgage into a 15yr refinance with a solid 20% down on a small house.

I've saved up just enough for 6 months of emergency savings and paid off all our short term debt including car loans.

We are ready to start putting 1/3rd of my salary into investments I am looking for advice on our next move.

Go full bore paying off our mortgage 220k remaining at 3.5% OR invest it into a Vanguard index fund (which are recommended?) for the next 15 years

Dollar for dollar which would be the better choice?

And giving investing is it really better to max out my 401k, IRA's before putting money into an index fund, I fear lack of liquidity so thought it worth asking for people opinion?

mozar

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Re: To payoff the mortgage early or to save
« Reply #1 on: February 03, 2020, 06:21:59 PM »
With such a low interest rate you should be putting your money in an index fund.
The reason you should max your 401k first is that you can put it in pre-tax which means you can lower your tax burden.

kpd905

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Re: To payoff the mortgage early or to save
« Reply #2 on: February 04, 2020, 05:12:54 AM »
I'd max out all tax advantaged space.  If you have money left over, then you could throw it at the mortgage, even though you'd still most likely be better off investing it in a taxable account.

FrugalToque

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Re: To payoff the mortgage early or to save
« Reply #3 on: February 04, 2020, 05:55:47 AM »
If you have a sub-prime loan, (if those still exist in your jurisdiction) I guess you should have to worry about liquidity.

There are those of us who want to get out of debt, and there are those who want to ride out the mortgage to its maximum length because the market does give better returns.

We all agree, however, that you should prioritise your tax-advantaged accounts ahead of low-interest mortgages.  The payback on those (traditional 401k in the US?  RRSP in Canada) is so large you just have to take advantage of them, no matter what your feelings are about mortgages and debt.

If you're maxing out those accounts, then you can decide how you want to invest the rest of your money: a 3.5% guaranteed mortgage pay-off or a 7.x% average stock market (knowing that, in the U.S., your mortgage interest is tax deductible)

Toque.
« Last Edit: February 05, 2020, 06:26:55 AM by FrugalToque »

MDM

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Re: To payoff the mortgage early or to save
« Reply #4 on: February 04, 2020, 12:34:25 PM »
knowing that, in the U.S., your mortgage interest is tax deductible
Only to the extent itemized deductions exceed the standard deduction.  With a $24,800 standard deduction, most couples' mortgage interest will not be fully tax deductible, and may not even be partially deductible.