Paying off mortgage early
I purchased a house for $360K 2 yrs ago, and moved to another state only few months after buying it (move was unexpected). I’ve been renting it out, and rent pays off for mortgage and tax (I need to pay HOA and maintenace out of pocket ~$300 per month). I have enough cash to payoff the morgage ($250K remaining) and can keep the property as an investment which makes me ~25K per year, is it wise or should I use my saving to buy another property or invest in stock market?
I would keep some cash. Paying off is good but if someone else is paying for you, why bother? Get another property but make sure u buy a property which keeps you cash positive (no out of pocket payments). If that’s not possible, invest in stocks and diversify.
U didn’t even specify ur interest rate
My mortgage is 15 years, 3.25%, 13 yrs remained
If the rent covers expenses, then it often makes more financial sense not to pay the loan off early. This is because the loan is a hedge against inflation. Over time the loan payment will be worth less, whilst the rent (generally) increases.
Is your 25k already minus HOA, maintenance, tax and insurance?
Maybe 18K after deducting everything
So you have 360k investment (if fully paid) giving you 5% return. Not a very good return unless the properly appreciates or the rent goes up. If it’s Wisconsin, neither will be true ?
18k/360k= 5%. Depends on if the house value is growing or not. Rental properties have tax benefits, you may want to take it into consideration.
House value is growing, currently it worth $380. I cann’t use tax benefits since I only lived in the property for less than a year
Also, rent will go up over time, but remaining mortgage will go down. So that 5% return will shoot up there.
If you have the money invested and you're making more than what you're paying in mortgage, then you should keep making payments. If you are paying more than you can make with the $$, then pay it off now. If you pay it all off, you're making 5% on that money. If you're making 7% in the market, then it's better to make payments. Make sense?
Sure if you dislike money or think you cannot earn more than 3% on your money elsewhere.
Paying 360k for $18k/ye is not a great return. I’d sell and move on
Take 150k and recast your mortgage, now it pays for it self and you can invest the rest.
Where is the property? I would buy another one only if for self use otherwise I would diversify..also depends on where your other property is
Property is in Wisconsin, and I am living in California. My only concern for buying a property for self use is that I don’t know how long I will be living in my current city.
Then I would not buy in California..it’s going to be a massive investment and maybe you’ll be leaving soon