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For example, retirees may want to reduce or eliminate their debt since they're no longer earning employment income. In other cases, people may want to free up their monthly cash outflows by paying off their mortgage.

The table below shows what it would cost to pay off the loan 10 years early and how much interest would be saved based on three different loan rates: 3. As we can see from the table above, the higher the interest rate, the larger the amount remaining on the loan with 10 years left on the mortgage.

For the mortgage with the 3. As mentioned earlier, the structure of the amortization schedule for a mortgage leads to most of the interest being paid in the early years. If a homeowner is considering paying off their mortgage early, it might be worth considering whether some or all of those funds would be better off invested in the financial markets.

The rate of return earned from investing might exceed the interest paid on the mortgage for the final 10 years of the loan. In other words, the opportunity cost—meaning the foregone interest that could be earned in the market—should be considered.

However, many factors go into evaluating an investment, including the expected return and the risk associated with the investment. The above investment gains were compounded, meaning interest was earned on the interest and no money was withdrawn during the year period.

In other words, there would be no material difference between investing the money versus paying off the 3. One of the reasons for such a difference between the investment gains and the interest saved from paying the loan off early is the power of compounding. Before investing money in the market, it's important for investors to determine their level of risk tolerance , which is the amount of money they're willing to risk in order to make an investment gain.

There are various types of investments to choose from, and each has its own risk associated with them. For example, U. Treasury bonds would be considered low-risk investments since they're guaranteed by the U. However, equities or stock investments have a higher risk of price fluctuations, called volatility , which can lead to losses for the investor. Going back to our example, if the homeowner decides to invest their money in the market instead of paying off the mortgage ten years early, there's a risk that some or all of that money could be lost.

As a result, if the investment loses money, the homeowner would still need to make ten years' worth of loan payments. A person's level of risk tolerance is often determined by their age, the amount of time remaining until the money is needed, and their financial goals. For example, retirees might be risk-averse since they're not earning employment income any longer.

Conversely, younger people in their 20s or 30s have a longer time horizon, which means their portfolio has more time to recoup market losses. As a result, a younger person can invest a greater share of their portfolio in higher-risk investments such as equities. Although the stock market can provide sizable returns, there's also a risk for sizable losses.

In other words, just as taking on more risk can magnify investment gains, it can also lead to more losses, meaning the market risk is a double-edged sword. As a result, investors should have realistic expectations as to what they can earn in the market. Before deciding to pay off a loan early, it's important to consider the interest rate, the remaining balance, and how much interest will be saved.

Borrowers can use a mortgage loan calculator to analyze the amortization schedule for their loan. Also, how that money could be used versus paying off the mortgage should be considered. For example, some of that money could be used to establish an emergency fund, save for retirement, or pay off credit card debt with a higher interest rate.

It's also important to consider that mortgage interest is tax-deductible for many homeowners, meaning the interest paid reduces your taxable income at the end of the year. Before deciding whether to pay off your mortgage early or invest that money, a financial planner and tax advisor should be consulted. A lot depends on the nature of the mortgage and your other assets. If it is expensive debt that is, with a high interest rate and you already have some liquid assets, like an emergency fund, then pay it off.

If it is cheap debt a low interest rate , and you have a good history of staying within a budget, then maintaining the mortgage and investing might be an option. So the best course is usually somewhere in between: If you need some liquidity or cash, then pay off a large chunk of the debt, and keep the rest for emergencies and investments.

Just make sure you take an honest look at what you will spend and your risks. Treasury Direct. Financial Industry Regulatory Authority, Inc. Home Equity. Loan Basics. Federal Reserve. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. How a Mortgage Loan Works. Paying Off a Mortgage Early. Investing in the Market.

By contrast, in the later years, your payments are going more toward the loan principal. Saving money on interest is not the worst idea in the world. But mortgage interest is not the same as other types of debt. For home mortgage debt incurred before Dec. If you need something to reduce the amount you owe Uncle Sam, the mortgage might be worth keeping. This eliminated the need for many taxpayers to itemize their deductions and led to many homeowners to forego using the mortgage interest tax deduction.

Building equity in a home that is financed by an adjustable-rate loan will make it easier for you to refinance to a fixed-rate mortgage if you ever decide to. Also, if local real estate values are tanking, if people in your area are seeing little appreciation—or even depreciation—in their homes, paying down a mortgage is a way to keep from going underwater owing more than your home is worth. That could make it difficult for you to sell the home, refinance it, or obtain other credit.

Thanks to the joys of compound interest , a dollar you invest today has more value than a dollar you invest five or 10 years from now. That's because it will be earning interest—and the interest will be earning interest—for a longer period of time. So each year you delay saving for retirement will hurt you a disproportionate amount. For that reason, it generally makes more sense to save for retirement at a younger age than it does to pay down a mortgage sooner.

You can estimate your retirement savings with the U. Social Security Administration's calculator. Your portfolio has more time to recover from roller-coaster behavior by the market. And the stock market has historically risen over the long term. Between these two options lies a compromise—fund your retirement savings while making small additional contributions toward paying down your mortgage.

This can be an especially attractive option in the early phases of the mortgage when small contributions can reduce the interest you'll ultimately pay. Or, if the market is being extremely volatile or spiraling downward, it might make more sense to pay down your mortgage instead of risking the loss of investment funds. In each case, you have to run your own numbers. By prioritizing your retirement-savings goals first, you can then decide if any additional savings are best spent on further contributions to your mortgage or on other investments.

In fact, you should balance paying down a mortgage against the return prospects of other, non-retirement savings options. For example, if your mortgage interest rate is far above what you can reasonably expect to earn, getting rid of it can be advantageous and vice versa if you're paying a relatively low rate of interest. Also, if you have an unusually high interest rate on your mortgage, it makes financial sense to pay down the debt first—or look into refinancing.

The fact is, maybe you shouldn't. But if you insist, try to do it in the early years of your mortgage. Consider this when thinking about saving for retirement: thanks to the joys of compound interest , money you invest today will grow and grow and be worth more by the time you're ready to enter the golden years.

Paying a mortgage off, or down, early is a great thing to be able to do. Starting early on saving for retirement is also great for your finances and your sense of well-being. The money you spend paying off your mortgage won't be compounding, and the rate at which it grows in an IRA or index fund will be greater than your rate of interest on your mortgage.

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Arguably this might be the time to be investing! So not knowing if the market is on a high or low without hindsight what is the plan? What would be the best way to exit this? Gerry — Sorry, missed your comment. Personally I would not rely on the investment returns to repay the money you borrow.

Much better to make heavy cash repayments and slowly reduce your gearing and your risk as your time horizon shortens, I feel, if you decide to go down what is already a risky path. I think the key variables are 1. Most people are going to have 3. So these people will just want to invest in equities and not pay off mortgage. But in the next 5 years, they are probably going to want to focus on paying off mortgage.

After that they will want to invest in a combination of 1 and 2. Also the post was written a couple of years ago, what do people think give current market performance and mortgage interest rates? I have k, looking to buy a place to live for k and cant decide what to do. Investor, if I were you, I would hammer down the mortgage instead of investing. Many people would disagree, with interest rates so low. But with mortgage interest rates as low as they are, you can hammer down on the principle owed far faster than you could if rates were high.

Most people just get used to the idea of having a mortgage almost forever. But seeing your net worth increase with every extra payment would feel amazing. The stock market is never guaranteed, but the return from paying down your mortgage is. If you are paying 3. And with rates so low, you could really hammer that mortgage down before rates rise.

I am just pondering this very same question having recently retired, partly mortgaged my house to buy a house to rent to be paid off in 6 years, and now having sold my deceased parents house have the ability to pay off the mortgage with no redemption fees. A few calculations showed that tax and risk are the two parameters for consideration.

The interest on the mortgage is a deductable expense from the rent. The interest on any investment might be taxed in different ways. Personal loans are now cheaper than my 10 yr fixed mortgage deal taken out during the credit crunch.

My mortgage 5. I suspect more people are in the same position. If you choose to invest instead of paying off your mortgage then consider this question — would you be willing to refinance the equity out of your mortgage thus increasing your debt to add to your investment accounts?

If not, then you are logically inconsistent. Every businessman or woman borrows to invest. As I said in my previous post, that restarted this thread, profitability is about risk and tax , but I could add that it it also about the effort put in to make the capital work. In my case I decided to mortgage my house to buy another house that I now rent.

This was not a simple investment decision as it was instigated by a family situation. But, even so, it was a profitable investment with rent easily paying the mortgage and capital gain accruing as well. Another family situation meant I was now able to pay off the mortgage or put the money into equity or bonds or even buy another property. In the end I decided to pay off the mortgage, but given a different perceived stock market situation , I might have moved the other way.

The mortgage was due in only six years, but, if it had been longer, I might have moved the other way. If the BoE had not signalled a rate rise I might have moved the other way. Anyhow, I am now sleeping easier, but if I had been greedy or younger I might have moved the other way….

When your home is paid off it is easier to weather these storms with a minimum of personal adversity. Plan for the unexpected because eventually it will happen. I am currently thinking about making overpayments to our mortgage but would like to double check something beforehand. I have one mortgage payment per month but in reality this is comprised of two loans. After initially borrowing k, we remortgaged a further 10k a few months later for furnishings.

If I begin to overpay, to which account should I direct the overpayment? Thanks investor and Stuart, enough said. You need to compare the expected investment returns against the interest rate on the debts. Never mind some years it will be less like the crash a few years ago and sometimes it will be much more like this year.

Now, remove your inflation figure from that. There is a school of thought that says you should invest by mirroring the investments of the ultra-rich, eg Warren Buffett. Because of various business decisions, he is actually increasing that mortgage value every year. What if I also told that Buffett had a magical power that could lower all mortgages at will.

Nominal debt at low interest not to mention tax deductible interest is a good thing if you use it for investing patience and safety cushion may be required. I am squarly in the investment camp, but i do recognize the choice is not for everyone and for some paying down the mortgage is a better option. To me, this is a simple math problem and there is a very high probability you will come out ahead in the long run by investing.

But this assumes you have the self discipline to actually invest the extra money every month and not spend it. I also personally believe that inflation will eventually go higher. Bottom line, math says to invest but psychology is a factor and if you value the thought of owning a home free and clear you may want to do otherwise. From a math perspective just ask yourself why apple etc have been issuing debt lately even though they have no need for it?

Cheap leverage can really juice returns. Your mortgage is cheap leverage. As has been mentioned in plenty of the threads, either way you look at it is a win-win. Lets say the markets tank this year.. Of course you would. But your right..

But like the poster above, the sense that YOU own the roof over your head… Priceless…:. You will very likely end up with more money in your pocket if you pay off that mortgage as slow as possible. I paid off my mortgage started in Feb. As it turns out, from to Feb , the stock market had essentially no growth. In the end, I did better by taking the money out of the stock market and paying off my loan early. If you happen to hit the one wrong time period, yeah, paying it off could make more mathematical sense.

But that is the minority of the time. My mortgage is a risk-free 3. A good hedge against equities, in my opinion. It decreases your monthly expenses, too, which is invaluable peace of mind in my book. Given the market is overvalued right now and we are in a 5 year bull run the safe bet is to pay off your mortgage. Money is cheap to borrow right now and too many people are using borrowed money to play the market.

History has shown when people over leverage themselves in the market the market yields often much lower during those periods. But the good thing playing the market is that if you receive dividends which are taxed at a lower rate than your rental income if you were to pay it off. What I would do in your shoes? Once there if a good market correction then put more money into the market from borrowing against your first rental.

I feel the housing market will rebound in the next few years so now is a good time to buy I am thinking. If you pay off the mortgage now, you will have a ton of cash flow each month… which you will then invest. In theory, you can outperform by levering up at the bottom of the stock market i. The opposite is also true, you will underperform if you lever up at the top of the stock market i. Unfortunately we only get to see if the math wins in hindsight. I bought the property a few years earlier, which had already doubled in value.

It would have taken until mid just to get back to breakeven, not including all the interest I would have been paying. Having no mortgage when the shit hit the fan? But, shift my timeline ahead by four years and it would have been a lot better to take out a loan and dump all my money into the stock market.

Or I could have bought Bitcoin in and been a multimillionaire billionaire? Sadly, my crystal ball was broken at the time and remains so. Either you get a free and clear house or you get a bigger investment account over the long run.

Both outstanding options IMO. Consider also the possibility of experiencing a period of unemployment during this period whilst still having to meet your mortgage repayments. You have to admit he has a very good point. You made a great, even-handed case for paying off the mortgage early vs using the extra payment amounts for equities. Studies show that very few investors have the willpower or stomach to invest regularly and stick with it through thick and thin. One of the biggest mistakes of individual investors is over-confidence and thinking everybody else lacks willpower and stomach.

A rental property, fully paid off with no mortgage. Rental income provides sufficient income to live off, not flash cars and Maldives every year, but a decent existence. Said property took most spare cash to renovate.

The other option is to use the offset mortgage on the personal house to replenish the coffers. In essence borrowing to invest, which does fly in the face of common sense! Interesting to revisit this article since after it was written to see what has actually transpired. But otherwise pretty spurious IMHO. Monevator has been hammering home the message that private investors should be investing globally for many, many years.

Also the return would come down to the extent that an investor chose to diversify the portfolio into bonds and other lower-returning assets. Of course this was a great period to be an investor, and we only know all this in hindsight. Some of the comments above are timeless, but others reflect a bygone age when we rode penny-farthings and invested in palm plantations.

I think alot also depends on the level of mortage vs equity in the home and to income and to the value of investments. I currently have 3 x my mortgage invested across isas and pensions. My mortgage is less than 2x joint salary between myself and my partner. Leaving the capital intact. But who cares. Whether a decision was the right one or not is not decided by its outcome which is unknowable obviously but by the process.

And for the 7 or 8 years since, we have. I pursued the heart of head policy of notionally paying off the mortgage over investing spare funds. As soon as the mortgage was cleared it did free up additional funds for investment purposes. I hold a fully offset interest mortgage and have often thought about drawing down funds for investment.

My hope is that my ISA continues to grow recover from the dip of last week and I can either repay the mortgage with ISA funds or from pension tax free funds. Overpayment calculations are a different beast. One reason you might want to pay down your mortgage is rate risk.

Of course for those that are spenders at heart then mortgages are probably essential financial discipline and the property market will generally have equally or moreso rewarded leverage to the maximum if those people can ever bear to downsize or wear the CGT on their BTLs.

I remember reading this article a decade ago and the principles helped me out no end on my journey. Nice and simple to use. I tested it out just to see what my numbers look like and only 2 years difference between interest only and current mortgage rate.

It made me feel better about not aggressively pursing interest only. I went with the pay it off rather than invest. Mortgage-free for most of the last decade now — and still a feeling that never gets old. Plus the lack of a mortgage meant I was able to massively ramp contributions to my pension and take advantage of the tax benefits there.

I quite envy the Americans with their 30 year fixed rate mortgages, as it seems to eliminate this concern. I am getting share requests to the spreadsheet from readers, you see. Nice re-work. Some forward reference s to the impact of volatility on returns might be helpful. In my experience, mortgage over-payments may not be smooth either, e. Yes, making a copy works just fine. Is that clearer or more confusing? Hi Investor, Yes, I am able to create a copy of the spreadsheet and edit my copy.

Cheers, SMT. Lots people commented saying invest with a mortgage is risky because one could lose their job and have their portfolio value halved in a recession. However, in my opinion, invest with a mortgage is far less riskier than overpaying the mortgage in this scenario. But if the same person had invested in a global equity tracker fund instead, they would then be able to sell some of it each month to meet the repayment. Even if the person has had emergency fund in cash savings, the same would still apply as soon as the cash runs out.

As you can see, invest is less riskier if you are worried about losing your job. Also, please keep in mind that the investor will only be forced to sell just enough to cover the repayment. The remaining portfolio will still enjoy the market rebound if that is to happen.

Fatbritabroad Interestingly I recently sold my business and have adopted the exact same strategy as you have. Instead of paying my mortgage off fully, I hit it with a large chunky payment. My strategy like yours is to keep investing for the next five years and see where it takes me. Hedging our bets of sorts. I really like the fact you proactively defended the pay down the mortgage choice; rather than just a throwaway line.

Even more so as rates start to climb and longer maturity bond ETFs get hit in value. On the other hand staying leveraged to UK residential property has worked out well so far, especially given the continued race for space that remote working has enabled. And once you downsize it is very difficult to move back up the ladder again, so not a decision to rush.

Post 60 I intend to spend rather than save further…. It was a goal though. The mortgage term presently runs until my mid 60s since I wanted flexibility and reasonable monthly payments in case my income ever dropped, rates went up etc. Any overpayments can then be made on my terms as and when, rather than the lenders enforced monthly payments. The chances of ending up on the corporate scrapheap climbs dramatically over the age of If it happens I guess I could just downsize at that point, e.

You could instead sell just enough each month to cover the mortgage repayment and living cost , but keep the rest vast majority of your pension fund fully invested. The lower the expected market return, the stronger the case for repaying the mortgage. The ISA contribution limit has trebled since — ripe for a claw back of some kind.

Really pleased to see my spreadsheet make it into the updated article. Hope people find it helpful. For me the psychological benefit of potentially being mortgage free 10 years earlier is well worth the risks and impact in the interim. I spent over a year evaluating whether to go down the BTL route or not.

I ultimately decided that BTL was far more susceptible to future tax change arrangements, including changes that would impact historic investments. I cannot see the same ever being done with ISAs. I have used this approach in the past; albeit structured somewhat differently repayment — fixed rate with repayment — fully flexible primarily as a hedge against rising interest rates.

Are you in anyway locked into your arrangement? Lastly, are you aware of endowment backed interest only mortgages? For years they were good often with significant surpluses from the endowment and then they were not — with shortfalls aplenty! Pretty frustrating. Only experience I have is my parents being left with a decent sized shortfall in the s. As you point out in your article, I can subject to any repayment constraints, use this investment fund to pay down the mortgage at any time in the future.

The calculation assumes I use the fund to pay it off completely at the date of the original term expiry, I. The other benefit of this strategy is that it has similarities to the structure of an offset mortgage without actually being one in so much as if I need that money in the fund I can readily access it e. My gambling instinct says option 1 but my safety first side says option 2.

But still 1. Interest rates are rising, albeit slowly. I currently have tenants who look likely to renew for another year in July. This is the age-old question. You should be able to beat that return by investing in a low cost portfolio of index funds. Debt can be effectively leveraged to earn a higher return elsewhere. But I love the idea of mortgage free homes. I like pushing extra money on a mortgage.

If I were in your situation, I would make a few extra mortgage payments every year, and invest as well. Thanks for your simple and clear explanation of your mindset. You sound like a market timer, if you think it is a good idea to leverage your interest only mortgage to invest in equities. When considering leveraging my mortgage to invest, I think about whether I can handle it if the market dives. By definition there are two characteristics to borrowing.

Number one: borrowing works both ways. So you are compromising the idea of margin of safety if you borrow. Number two: borrowing reduces your staying power. If you are a value investor, you are a long term investor, so you want to have staying power.

Considering the rule bonds might play in the ISA as per articles on portfolio makeup. I mortgaged the Bristol property to release cash to buy my london flat outright, so worst case I sell the Bristol property to cover the mortgage. There are many ways to get to the end goal.

All of us have some irrationality in us and understanding our emotions is important. For me, being indebted to anyone else just make me queasy even if the numbers make sense. Mortgage is the best debt you can get due to leverage and tax benefit. As such, I accelerated my mortgage and paid it off fully in my twenties, instead of slowly paying it in my thirties or forties even though the numbers likely made sense.

Instead of taking a car loan and buying a new car, I drove my old banger until I could pay for a new car outright and never took a car loan. At the same time, I am very conservative when it comes to debt. Perhaps that combination, is irrational to you but it has always made sense to me.

I remember the and bear markets. During both, I owned my house outright, so panic levels were reduced. If had considerable debt, had a large mortgage say during financial crisis , and then we hit a recession AND lost my job, that combination would scare me to death. Age matters a lot. I assume by what you write that I am much older than you I am Due to my age and net worth, I would therefore have a lot more to lose if I adopted your strategy.

There is a lot more downside than upside dealing with leverage for me. The likely change I will be making as I get older is add bonds rather than leverage myself even further. Margin stuff just scares me. If that is irrational, so be it. Good luck to you. With low rates, you assume you will earn a high-enough investment return on stocks. Therefore, borrowing to invest more in stocks makes sense to you. However, when interest rates are very low, that is exactly the time NOT to invest in stocks.

Let me explain:. That conclusion is wrong because stock returns are actually determined by the very interest rates that you find so favourable for your plan. Stock returns increase as interest rates increase. The opposite also applies. If interest rates are low, stock returns will also be low. With bonds paying so little, investors like yourself have been drawn to investing more in stocks, which makes more sense.

This increased demand for stocks has pushed stock prices upwards. High stock valuations lead to future lower investment returns. This may not work because future stock returns will be below average. As I said, my main residential property is paid off, and the mortgaged property is essentially a BTL. I find it fascinating and scary how little my peers care about what happens if they lose their jobs, through illness, redundancy or retirement….

Notify me of followup comments via e-mail. You can also subscribe without commenting. Next post: How do zero commission brokers make money? Previous post: Weekend reading: where the wild things are. Monevator is a place for my thoughts on money and investing. Please read my disclaimer.

You can send me a message. All rights reserved. Disclaimer: All content is for informational purposes only. I make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use. Full disclaimer and privacy policy. This site uses cookies and features affiliate links. Scenario 0: In this scenario I would invest the money I had planned to apply to the mortgage in order to pay it off in 7 years.

Scenario 1: In this scenario I pay off the mortgage early and then start investing what used to be my monthly mortgage payment. I think this is the scenario that Even Stevens was suggesting we compare against scenario 0. Scenario 2: In this scenario I pay off the mortgage early and then start investing what used to be my monthly mortgage payment like in scenario 1.

Which by the way, this would put me at 58 years old. Do you want to help keep our lights on? Here are a few ways you can help us out:. OR you can check out our Recommended Products and Resources page. Good analysis. Even with this plan I still max out my pre-tax accounts and plan to invest in another piece of real estate sometime in the next months and will soon be putting some money back in my Prosper account.

My opinion is starting to evolve a bit on the paying off the mortgage early debate. I see some qualitative benefits to NOT having a mortgage. And I think I am going to throw a couple hundred bucks per month at it, but the bulk will be saving in a taxable account and investing in equities. But the point is, if you have cash, you have decision making power. So, if one is to invest and then make the decision when they have enough to pay off the mortgage, one could argue [and I do] that is a superior position to be in.

You are capturing the upside [with risk] and then you have decision making power. You have the money, and you can decide what you want to do with it. The choice was made early on. Either way, there is risk in the market, but it never has to be just this or that. You can always split it up until you are happy with where the risk is. I think it is as simple as the equation you included, but only when looking at it from a truly academic perspective or at the very least over a much longer time period.

So maybe my opinion is only slightly more evolved than yours and is likely still subject to evolution after writing this response. First and foremost I look at the extra payments that I am throwing at my mortgage as a bond allocation. So with that in mind I have no exposure to bonds since my mortgage is playing that role for me. Next this is second on the priority list to maxing out the available pre-tax accounts. So I think we are on the same page here.

With cash you have options. You bring up a good point about holding onto the cash until you can pay off the mortgage in one lump sum. I have contemplated this, but here is why I am not doing it that way at the moment:. And with interest rates near zero percent I would essentially be sitting on way to much cash losing purchasing power. I admit that I might think I am smarter than I actually am, by trying to time the market.

If you convert that to a compounded rate over the last 6 years you are looking at a rate of And if you believe that the market is mean reverting like I do there is only 2 ways that we get back to a historical rate of return:. We have a significant market correction that gives us a lower base to continue compounding from. Or we have years of low returns in the market. If you extrapolate it out to the year when I plan to have the mortgage paid off.

Now of course it might not normalize over 7 years and could take much longer. However I think technology is actually speeding up these sorts of cycles. Either way I think there are much better prices ahead. I completely buy into Warren Buffets rule of buying into weakness, as that gives you a margin of safety to be wrong.

It is all just a numbers game to me. More of a psychological thing. My market hypothesis could be completely wrong and stocks could continue marching higher at a high rate of return. This would leave a lot of money on the table. But I would have my mortgage paid off. I also think that it would be offset by faster advancements in my career and thus earnings. If the economy continues to pick up speed my company will continue to grow and it will only get me to where I want to go faster with higher income.

You seem to make a ton of spreadsheets for things. I think they could be useful to some of us that love number crunching. Brian over at Debtless in Texas is actually doing that very thing on his site. I was going to send him some of my spreadsheets and he is going to make them available on his site.

Some of the things I do are ad-hoc. Others I set up as templates with inputs to make them a bit more dynamic and easy to update. Nothing in particular. Nothing wrong with paying down early, especially since your contributing a lot to stocks in your k and IRA. One alternative not mentioned would be to invest the money in to P2P and consider that your bond allocation.

Good point on the P2P lending. I actually plan to start dumping some new money into my prosper account that has been largely inactive for the past 2 years while my focus has been on other things. But this will be in addition to paying down the mortgage early. I think about this every day. The money is just too cheap 3. However, the market valuations scare me too.

Trust me Mr. I do believe that in the long run the market will always go up, but I also believe the market is mean reverting. And as I outlined above in my long response to Elroy, there are only two ways I see the market reverting back to the mean:. I know this sounds sick, but I am happiest on down days. But you know there is trouble lurking in the shadows when everyone in your brother is telling you that you have to invest in the market.

I have also noticed a huge uptick in credit card offers and credit balance transfers. Maybe its coincidence, but its the exact same thing I saw in Maybe I am reading into it. Only time will tell. Come on baby! Sometimes I almost feel anti-American getting excited for a market crash and none of my friends and family would understand.

Which by the way…what did you end up doing with your Apple stock? Do you liquidate any of your positions? Sell some calls against it? Fantastic analysis GYFG…as usual. I am wrestling with upping the mortgage payments significantly, but while investing at the same time. I guess it comes down to personal decision, but I kind of like getting a piece of both pies. I constantly look at this stuff from different angles to make sure I still like the strategy and think it makes sense. Of course I am still maxing out the pre-tax accounts as a number 1 priority.

So kind of want to have my cake and eat it too. Another solid post. Do the best you can and make decisions that will help you sleep at night! Congrats on getting the house paid off. Do you mind if I ask how old you were when you got it paid off in ? How long did it take you? And what was the original mortgage amount? No problem at all. By the way, I live near Houston so obviously housing prices are much lower than other parts of the country.

I was either 38 or 39 when I paid it off. At the end of the day it seems like paying off your mortgage early will give you a lot more peace of mind than angst over the gains you may have gotten by investing the extra principal payments. So I definitely want to pay off the house early.

That said, I need to make maxing our retirement accounts the first priority. In , we can raise the mortgage significantly and really start paying down this thing. Sometimes you just have to play to your psychology.

Sounds like you have a plan. I would definitely make it a priority to get those pre-tax accounts maxed out. Totally understand about not wanting to have the burden of debt. I am not opposed to leverage, but only when I need it and only to a certain point.

Right there with you. But considering things are how they are, your approach seems spot on. And I am sure this will not be the last post on the top looking at it from different angles. Next one up will be the benefits of accumulating the cash in savings and paying the mortgage off in a lump sum vs making the extra payments along the way. I have a strong bias towards accumulating savings because of the liquidity.

We never know when a setback is around the corner job loss, change in health, etc. If you face a cash crisis, the mortgage company still wants the next payment — even if you are years ahead of the repayment schedule. It is far easier to manage inevitable life challenges with a comfortable cushion in savings. But this is definitely a risk in this strategy.

There is certainly a chance in the future that I will stop making the extra payments to the bank and instead just accumulate the money in savings until I can make one lump sum payment. But for now I will stay the course. I paid off my first house in — it took me five years. For my second house, I bought in and paid it off in a couple years. The mortgage rate was much higher then and I had no regrets whatsoever.

Great analysis. I always was curious to know what difference it would make between paying off mortgage early vs invest. Of course it would really depends on the market at the time but it helps me see the picture. Maybe balancing out would be a great idea e. So true that it all depends on the market.