I know that if you I received a large lump sum of money I would pay off my mortgage in a heartbeat AND then take the rest and put it in the stock market. I know that mathematically that may not be the right position, but it really depends on your personal situation.
In order to determine whether or not you should pay off the mortgage first or invest more you need to ask yourself a series of questions. Here are some things to think about:. What are your attitudes about debt? Are you comfortable with it? Do you hate it? What is your time horizon for retirement? Are you a disciplined investor? Can you be disciplined enough to take extra money, put it into investments, and leave it for long-term financial planning? Answers to some of these questions can help you decide your own answer.
While there is certainly this debate about paying off the mortgage vs. First, pay off your debt before you retire. It will just provide your peace of mind as you move into your retirement years. So if I have to choose I would dedicate myself to saving more for retirement, even if that means I would rent rather than own a house. Buying a modest house, paying it off quickly, and then using that house to get into your dream home would probably be a better strategy.
Finally, determine what your financial goals are. What are your financial goals? Do you want to own rental property? Retire to some beach somewhere? Knowing your goals can help you create a larger plan.
That plan then can dictate whether or not you pay off your mortgage early or not. There are some things you can do to accelerate this process. First, switch to biweekly mortgage payments. If you are currently in a year mortgage and want to pay it off early just switching your mortgage to biweekly payments will shave about 8 years off your mortgage and save you thousands of dollars in interest payments.
Second, refinance your mortgage. Another way to pay off your mortgage early is to trade it in for a better loan with a shorter term—like a year fixed-rate mortgage. Sure, a year mortgage will probably come with a bigger monthly payment. You can refinance a longer-term mortgage into a year loan. What if you already have a year mortgage?
If you can swing it, imagine increasing your payments to pay it off in 10 years! Downsizing your house could be a drastic step. With the profits from selling your bigger house, you may be able to completely pay cash for your new home.
Now your goal is to get rid of that debt as quickly as possible. The smaller the balance, the quicker you can make it happen. Before shopping for your next home, first make sure all your ducks are in a row and know how much house you can actually afford. This handy checklist is a great place to start. If you need help figuring out what your new monthly mortgage payments will look like, try our mortgage calculator. In some cases, they may even be able to help you find a house before it hits the market, giving you a competitive edge.
Dear Dave: My husband and I are close to having our home paid off and being completely debt-free. Can we dip into our emergency fund to pay off the house? I might think about it if your emergency fund is way too big, plus you have a very small amount left to pay on your home.
But remember, your emergency fund should be three to six months of expenses—not income.
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