pay off mortgage or invest (which would be safer)
Have 600k in cash/stock . should i pay off mortgage or invest it . i want to be safe, if a recession comes . 3.75 fixed mortgage -26 years left always made more than 8-10% on investments (index funds/ dividend stock picks)
Why be responsible when you live only once? Party it up big time!
I would save for cash for recession time. When assets that have underlying value go down time to buy them. Rest of the cash bring down the debt if you are goals are debt independence
Agree with @cruella, with the only other exception being how much you hate being in debt. If it stresses you to have a mortgage, for whatever reason, and you would be able to live a happier more comfortable life without it, it might be worth it for you to do that even if the math is a little more favorable to keep investing/paying monthly.
Since its all assumptions. What happens if the housing bubble crashes so much that, his home value falls below the mortgage owed(happened in 2008) Wouldnt it be best to let go of the house to banks and buy other cheap houses with the cash?
I would say it depends on whether they would want/need to move in that situation. If they are at a stable company or location, then that drop in value would be temporary and also not having to pay a monthly mortgage means you have that extra money as cash flow. If they are very worried about a recession and being laid off and not being able to find new work in that area, then yeah... you’d want to remain liquid and easily movable... but you also probably shouldn’t have purchased a home
Cash is King in recession. If you pay off your mortgage, and your neighbors foreclose, your home value will drop
That makes sense . So keep the mortgage and save cash this is the state I am in now.
Yes. Right now you have a really cheap loan and wont be able to borrow with the same interest rate in a recession. In a recession, it's better to rent because housing takes a hit but you offset that with a low rate. If you plan to stay there long term then you're good
Invest it and use all gains to accelerate your mortgage pay down. Mortgage gets paid off faster (increasing equity, widening value/debt gap) and principal investment will still be there when mortgage is paid off.
How about you distribute your 600k and pay X of the house debt, keep Y in cash, invest Z in stocks. That way your mortgage payment (and total interest?) is significantly reduced for the remaining 26 years
Pretend you were to invest all of it in stocks and bonds, figure out the ratio you’re comfortable with. Take the money you would’ve invested in bonds and put it in your house, the 3.75 beats any bond. Rest in stocks and don’t touch it, cash liquidity is king.
Market is at the richest valuation in the last 140 years except for a few months in 1929. Do you itemize? That brings the effective rate down below 3%. If you don’t, no reason you couldn’t do a 50/50 split.
I do itemize .
The impact of a recession on Bay Area restate is going to be devestating but then stop will investments. Keep your money under your parent's mattress?
Depends on interest rate and how much u expect to make from investing. Math is simple.
Added details and rephrased the question . Target is to be safe if a recession comes
Math is. Risk assessment isn’t.