Learning, Sharing, and Teaching > Investor Alley
Pay off mortgage or invest in index funds?
Co-Movement:
Hi! Question for the community....
I owe 80k on my 10 yr mortgage (new construction that I rolled other money into to bring down loan to 80k, appraised at 225k.- I have 10 yrs to go on the payment as I just moved in...)
Interest rate is 4.75%, I'm paying around $300/m in interest on this loan the other $555/m is principal.
This property is also my business as a personal trainer. I have an 1800 sq foot gym on my property so yes its residential but also a nicely generating income property with employees and an online following.
I am 35 years old, debt free other than house. Full-time entrepreneur.
Question if I have ability to pay house off within 3-5 yrs with extra $$ should I do that or pay the standard payment each month for 10 years and invest the extra $$ into index funds?
thank you! Questions welcomed...
Retire-Canada:
--- Quote from: Co-Movement on January 13, 2018, 05:28:22 PM ---Question if I have ability to pay house off within 3-5 yrs with extra $$ should I do that or pay the standard payment each month for 10 years and invest the extra $$ into index funds?
--- End quote ---
Index funds.
Can you deduct a % of mortgage interest as a business expense? I'm in Canada and I deduct ~30% of my mortgage interest for my home office plus other expenses.
Eucalyptus:
If you can claim interest and business expenses on tax then its likely that your effective interest rate would be well below 4 %.
Thus, I would absolutely invest in index funds first. Let the mortgage ride out those ten years. Remember, you have locked in the cost of your home buy buying at today's market price, which is an added benefit (eg if you were to rent, this would continue to go up, usually, with the market).
Sounds like a great scenario for you and a great lifestyle! :-)
boarder42:
I'd refi that. 4.75 is high and you could likely pull out some more equity to invest.
Frugancial Advisor:
--- Quote from: Retire-Canada on January 13, 2018, 06:25:44 PM ---
--- Quote from: Co-Movement on January 13, 2018, 05:28:22 PM ---Question if I have ability to pay house off within 3-5 yrs with extra $$ should I do that or pay the standard payment each month for 10 years and invest the extra $$ into index funds?
--- End quote ---
Index funds.
Can you deduct a % of mortgage interest as a business expense? I'm in Canada and I deduct ~30% of my mortgage interest for my home office plus other expenses.
--- End quote ---
^^^ This. You should be able to include your mortgage interest as a tax-deductible business expense seeing as you use the property to earn an income. If that is the case, it is worth keeping the low-rate mortgage as long as possible and investing your money in index funds :)
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