I've come into a large amount of money. Should I invest it or pay off my mortgage?

Investing, Real Estate
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March 2017
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There's no easy answer to your question, but I'll try. From a purely financial standpoint, I can make a pretty strong case that mortgage is "good debt" (as opposed to bad debt like auto loans, credit cards, etc). If you have a good interest rate on your mortgage (4.5% or less), the bar isn't very high for doing better with a diversified investment portfolio. If you can earn more than the interest rate on your portfolio, you'll be ahead financially. And, that doesn't include any benefit you may get if you are able to deduct the mortgage interest. However, by paying off the mortgage, you are effectively "guaranteeing" the 4.5% (the rate used in my example) rate of return. There are no investments that can "guarantee" you that rate of return. Odds are, that over the long term, you will earn more in a properly diversified portfolio, but there are no guarantees. You can think of it like this; paying off your mortgage is like a CD, the return is guaranteed. Investing the funds involves a higher degree of risk, but also a higher potential return on your funds. Finally, a big part of the decision is emotional. I can't place a monetary value of the "warm and fuzzy feeling" that you may get from not having a mortgage.

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