Pay Off Mortgage Faster – or Invest?

Reader Comments
Back to blog

You forgot to mention that you have to pay capital gains tax and dividend taxes if you invest in stocks which lowers your return rate.

David of NJ 4:54PM July 27, 2010

Carolyn, I did leave a message Sat~unsure if it was posted: Yes, you may use this in your writing/collection of medical issues-A daunting task if I may say, and Thank You for asking-rare quality today, and nice. Many would have just scalped an 'annonymous'. Kudos. If my response appeared another spot I apol. for the 2x post ( I would like a copy of or to chat w/you about it- I hereby give the Editor in Chief permission to release my E-mail to you upon sufficient ID/or have them E me).
Mike, I feel ya bro/ I think I misunderstood the comment 1st- he was saying you can't build cred/equity w/out (yrs of mortg/pay etc..to get loan etc......) You should be able to do that w. Creit Card that's paid monthly; a couple of bigger buys/respectable letters. If you can't get a few of those, you aren't networking well! I say "Pay that SOB mortgage off ASAP!"And. If you are 20-30, stash as much as possible'even better if U get a job that will match like 7%. You won't miss it~I'd steer clear of stocks 4 ten + yrs, but I am no pro. Invest in family, self (like that idea U have~as long as you run it past like 10 people, don't 4get elders, smart ones) They have killed/got waxed with $ in their lives...."Luck is only what happens when preparation meets opportunity!" unknown~2 me, save it!
~

WarWalker of NE 10:31AM July 18, 2010

I was extremely lucky to have paid my mortgage off early by making double or triple payments when I could. My "return" on the investment was much, much, much better than the stock market / mutual funds.
If you can afford it, be debt and risk averse.

George of PA 10:53PM July 17, 2010

If any one out there has the formula to Look into the Future....call me collect....best guide lines I can say will be to do the math slowly , look at the figures closely & compare which one is best...the rate mortgage on your house or the rate from your investments....but these are just tools...in today's market you must be SUPER diligent to hold on to hard earning dollars....but it is not you the dum ass one....the problem is the down slide of the dollar global power caused by our on inflation.....many foreign investments are now best to the point that many international workers are asking to be paid in the highest currency value....there is a big difference between Thinking Local and international...be global.

Galan of CA 9:48AM July 17, 2010

Can I quote your post? I have been collecting medical care problems for a while now and plan on writing about them. "The Scribe Who Writes."

Carolyn Stephens of IL 3:56PM July 16, 2010

To Eric of WI
First I would like to say... are you serious?
Why would a bank ever thank you for a prepayment?
1. You owe the money to them. Pay what you owe..
2. They dont want you to prepay, they would prefer you didnt.
Also you see the biggest benifit from a prepayment in the early years of the loan when so little is going towards principle.
(you may only be able to do the math at the end of the loan, but by then its to late to get any real benifit)

Mike of TX 3:48PM July 16, 2010

Some have said, "I just paid it off right away" or "bought it outright". Well, good for you, you are in a class that is not the majority. I liked Eric's comments on health, disability, loss of job etc.... along with others; many young buyers do not take time to consider/investigate MANY of the issues that could befall them in the future before they buy/plan that $ into their lives.
I bought a nice 'starter' house @ 8.5 early 90's, refied to 6.0 when I could. I had a proffessional job and my own business and I did not know a lot about figures; yet I still could not see paying (ultimately) like 3x more than what I negotiated the house for. Well, I did become totally Disabled by a traumatic accident/then found I had an untreatable (save for nutrition/lifestyle/spiritual things) brain tumor by 39 yrs. old.
DO NOT kid yourselves; disability adds up to very little-and I lost 250K (my Lifesavings) on 'living + legal, Doctors co-pay' before I was 'granted' Disability after 2x application and (on the advice of a Neurologist-'get a Lawyer, they turn everyone down 1st and 2nd time".) This I found disgusting as what more proof did they need? Oh, I learned many things I could not believe.
At any rate, it would (and Will) behoove me to pay off my mortgage early- even if I add 10-40$ a month, as that would be 400+ I could be 'using' instead of living in 2x below the poverty level-and I have not rented/been to a movie in 12 yrs., made many 'green' improvements, do not eat out, etc,, only thing I kept was basic cable and internet. Oh, check w/ your State, though I went to make a will -"No, Sir, upon your passing, the State and Federal Government will seize your Home, Property, Vehicle, etc...." . Sh*T, I paid into the sys. fair and square, almost 25 yrs. , and am grateful for the Medical benefits and small monetary renumeration. I honestly just can not see how ANYONE-Illegals, etc.. can draw on this system w/out contributing. I felt I lost any 'extra' monies just in the fight. People say, Oh, you must not be that bad--believe me-some days death would be preferable-but you MUST fit exactly into Federal 'Guidelines'-if one thing is out of order/'still has a disjointed thumb that could work',rediculous. So I say pay it off! Use the $ in investing in yourself/family/business idea. And tell your pals to raid your house if/when you die-or it goes back to the Gov't.

WarWalker in NE @ Lincoln, 7/16/10 of NE 3:38PM July 16, 2010

Presuming you have already established an emergency fund, college funds, retirement, etc, why does no one ever mention the best reason NOT to prepay a mortgage? If you prepay your mortgage and something unforeseen occurs, be it health issues, unemployment, or peronsal bankruptcy...NO BANK is going to thank you for your prepayment and waive your mortgage payments. Furthermore, if you try to tap your home equity for an emergency...and don't have a job...no bank will make you a loan.
Another point...the average person stays in there home for 7 years...you don't realize the benefits of prepayment until the end...something like year 24-26 of a 30 year mortgage, and statistically YOU WILL NOT BE THERE, and the paltry additionaly equity you have gained is not guaranteed in the sale price of your home...especially in a down real estate market.

Eric of WI 1:55PM July 16, 2010

It is amazing how advice from the professionals always comes afterwards. It is like looking at the stock market's technical analysis after its performance.
An averange man, first has to find a way to earn to put food on the table; and then think about savings followed by investing. I don't consider buying a house as an investment. Your first buy in real estate should be a rental unit _____ 4-plex would be better. Live in one and rent out the other three. Hopefully, property value and the rents will rise (even if it is at inflation value). This way, you have a roof over your head, you have tax write-offs and with time, your living cost is minimized. However, you have to work extra. Income units are also not in the best of areas, you may have to think about schools for your children.
* In my opinion, stock markets are manipulated. Stay away from it.
* Cell phone, internet, cable TV, Credit cards, new car........ well, learn to examine you needs. The three c's (car, cell and credit card ) will cut into your finances if not used properly. Cut that cost and spend more time with your children __ a very good investment.

Mudan of CA 1:20PM July 16, 2010

some good , simple advice!
But I maintain that paying even 25 dollars extra on a mortgage reduces the term of the loan---thereby representing a substantial savings. The old "flip and flee" school of mortgages is history. I believe people will start staying in their homes longer, and when the pay off is done, you still have a solid asset.
I would suggest that anyone hoping to pay down their mortgage with a goodly sum contact their lender or mortgage company FIRST. I live in a state that doesn't allow prepayment penalties. Since my original loan was from a bank based here, the new mortgagor is bound by my state's laws. Had we done a re-fi, in a bank from another state, that would not be the case. If there is a "pre payment penalty, you could incur 10's of thousands in cost, which could put a dent in your potential savings---but its still better to know!

Lisa of NJ 1:18PM July 16, 2010