1. Your Questions About Invest In Stocks Or Pay Off
Mortgage
Charles asks…
Should I pay off my mortgage or keep money invested in stock
market?
I have a 30 year mortgage fixed @ 5.25%... I owe $211K on it. I currently have $530K invested
in stock market. As far as risk tolerance in market, I am at higher level..... I am 42 with no other
debt and make around $100K a year. What would you do?
have 25 years left on the loan.
Steve Winston answers:
Pay off the house. Once you pay off the house. The house is yours. If you dont pay off your
house and something was to happen and you couldnt make your payments. The Bank will take
your house.
Take what would have been your house payment every month and invest.
Its nice to have the tax break on the interest on the mortgage but, You'll save more if you pay it
off. All the tax break is is you dont pay tax's on the interest you pay the bank. If you paid
$1,000.00 a yr in interest and your in the 25% tax bracket. Then you dont pay the government
$250.00 in tax's. So, if you dont pay the bank 1,000 then you have to pay the government 250.
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2. I think id rather pay the government 250 and save myself 750.
Dont forget. You have to pay taxes on the money you make investing.
Steven asks…
Why paying off mortgage instead of investing in the stock market?
I'm confused. If a fixed mortgage is 7%, wouldn't it be better to invest in the stock market for
an average of 10% in the long run. In this case, I could have a tax deductable while gaining in
the stock market. So, should I pay off the mortgage asap or invest in the stock market?
Steve Winston answers:
You're absolutely correct. Also, keep in mind that the interest you pay is being reduced over
time, so it's less and less through the years.
If you throw inflation into the mix, with a fixed mortgage, you are effectively paying 3-4% less
every year.
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3. Your extra cash is much better off being invested--first a cash reserve (3-6 months expenses in
case you are temporarily disabled or lose your job), and then hit your accounts with tax benefits
like Roth IRA and your company's retirement plan.
Of course, none of the investments do anything for a sound financial plan if you aren't properly
insured.
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