I've been debating whether to pay off my mortgage. I've refinanced at 2.375% and can get a certificate of deposit (CD) for a year at 4%. It's a common dilemma for homeowners who come into a windfall of money, whether through an inheritance, bonus, or the sale of a business. Should you pay off your mortgage or invest your money?
The logic behind investing or paying off your mortgage if you come into a windfall of money depends on factors such as the terms and interest rate of your mortgage, your overall financial goals, and your risk tolerance. There's no one-size-fits-all answer, but there are some general principles to consider.
CNBC Select spoke with certified financial planners about where first-time homeowners to-be should put their money when saving for a down payment. The general consensus was that if you're planning to buy a home in the next few years, you should keep your money in a savings account or a low-risk investment such as a CD. The reason is that you want to protect your down payment from market volatility.
In this opinion piece, Wharton finance professor Michael R. Roberts revisits whether homeowners should invest extra money rather than use it to pay off their mortgage. Roberts argues that it's a mistake to view the decision as an either/or proposition. Instead, he suggests that homeowners should consider a hybrid approach, where they pay down their mortgage while also investing in stocks or other assets.
Paying off your mortgage is a major milestone. It's a moment to celebrate, but also to take specific steps. One of the most important steps is to make sure that you have a solid emergency fund in place. Experts recommend having three to six months' worth of living expenses saved in an easily accessible account.
I think paying off the primary residence mortgage would easily be my #1. If the mortgage is paid off and you die prematurely, the spouse and heirs will own the property free and clear. The heirs could then sell the property and split the proceeds or keep the property and rent it out.
Here's why paying off half of your mortgage as quickly as possible may be a better investment strategy than investing in the stock market. First, paying off your mortgage gives you a guaranteed return on investment, whereas the stock market is volatile and unpredictable. Second, paying off your mortgage reduces your monthly expenses, which can free up cash for other investments or expenses.
Using your 401(k) is not generally the best way to pay off your house. But if you're thinking of going in that direction, you'll have to weigh the pros and cons of withdrawing money from your 401(k) to pay off your mortgage. On the one hand, you'll eliminate your monthly mortgage payment, which can be a significant relief. On the other hand, you'll be reducing your retirement savings and potentially incurring taxes and penalties.
If you're wondering whether it's best to pay off your mortgage or take the money and invest it, there isn't a one-size-fits-all answer. The best approach depends on your individual circumstances and financial goals. A financial planner can help you evaluate your options and develop a strategy that makes sense for you.
