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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This is an age old question and the answer varies from person to person. There is rarely a right or wrong answer to this because there is more to the decision than just economics. It should also be noted that much more information would be needed to evaluate the pros and cons of your situation. Having said that, here are some questions to work through.

Are the funds you received tax deferred or have they already been taxed? This makes a big difference because the tax cost could out-weigh the interest savings via pay off. I wrote an article that goes through various types of taxation called Tax-deferred vs Tax-free Investment Accounts that you might find helpful.

How far along are you in the mortgage? When you are near the tail end of the mortgage, most of your payments are being applied to principal. Therefore, there is less savings to be had than if you were paying off earlier on into the mortgage.

What type of investment are you considering in lieu of paying off the mortgage? How liquid your funds are is a huge factor. If you invest in something where your funds are locked up, you lose flexibility. There is an expression that “cash is king” and depending on how much cash you have after the mortgage is paid off should be considered too.

You might consider reading this guest post on my site called Should I Pay Off My Mortgage Early Or Invest? It is an excellent resource that walks through the pros and cons.

Please note that this should not be considered investment advice and is only educational in nature. Be sure to consult your own investment, tax, or legal professional for help with your specific situation.

Best of luck!

David N. Waldrop, CFP®

February 2017
February 2017
February 2017
February 2017