Paydown mortgage or invest?
My hushand received a bonus payment of 150K after tax and we current have a mortgage of 320K with interest rate 3.8%. Should we make a lum sum payment for the mortgage or invest the money? We are in high income tax bracket so putting in HYSA like Marcus will yield less after tax than paying the mortgage.
Paying off is always discouraged by experts. Invest in index funds, you will probably see returns more than 3.8%.
If mortgage interest rates are high then it makes sense to pay it off. For 3.8% probably not much sense
If you do a principle pay down, ask whomever holds the mortgage about a reamortization. https://www.usa-mortgages.com/glossary/reamortization/ It recalculates the payments if your current loan after the pay down is applied. Can save you money monthly which you can use to invest.
Sorry, shouldn’t the interest payment go down automatically because of the lower principal? Why do they have to initiate the reamortization?
It can, what I offered was a suggestion. That suggestion, if done, could reduce both interest and principal payments, so savings more money monthly to invest. Again, a suggestion to investigate.
Put that 150 in a hysa earning 5% interest. When the interest falls below your mortgage rate, move it out of the savings account and apply it to the principle
I would invest
Everyone is going to tell you to invest, but there's a feeling of security you get without a mortgage payment that is unequaled by the ups and downs of stock market performance. There's also no guarantee that the stock market will outperform your mortgage over the next few years, despite how confident people will sound when they tell you there is.
It's smart to invest money in money market funds when their interest rate is higher than your mortgage rate.
Its personal preference to be honest 1. Either save / make money by investing 2. Or get mental peace by paying down mortgage Take your pick
Not much point in paying it off with that rate…except for peace of mind. Your returns investing elsewhere will likely exceed the interest savings. I too am wearing my golden handcuffs with these sweet sweet rates.
I paid my mortgage off in May, mental health benefits are well worth it.
You practically doesn't have any mortgage tax savings. So, 1.2% interest saving is better from a tax point of view. But, I would pay off mortgage as that's one less thing to worry and safe