Should I pay off my mortgage loan or invest with the money I am receiving from an inheritance?

My spouse and I will be inheriting about $750,000 to $800,000. The payoff balance of our mortgage is estimated at about $180,000 at 3.5 percent APR for 30 years. Would it be worthwhile to allocate some of the money we are inheriting to pay off the mortgage loan? We still have 27 years left to pay. Alternatively, should I invest the money and continue paying my mortgage?

Debt, Estate Planning, Investing
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July 2018

The inheritance has certainly unexpectedly strengthened your financial situation and has given you an opportunity to become debt free.  I personally do not care what interest rate you are paying on your mortgage because it pales in comparison to having no mortgage on your home.  The positive monthly cash flow from having no mortgage payment for the next 27 years supersedes the tax benefits of the mortgage interest.  You and your spouse will feel much better by doing so.  You will still have about $620,000 left in cash after paying off the mortgage assuming you receive $800k.  The cash balance can go toward investing, fully funding Roth IRAs, assuming your income qualifies for the full contribution, setting aside cash for a rainy day, or even purchasing a second home if desired, although second homes can become headaches very fast.  

You have a great opportunity to strengthen your retirement savings if you decide to invest some or all of the cash balance.  I also believe it makes sense to take some of the money and go on a nice family trip.  Enjoy yourselves!  

I also believe it makes sense to interview several financial planners/advisors to help you. This will be an excellent investment of your time.   Just make sure they are "fee-only" advisors and not "sales-only" advisors.  Advisors can help you define goals, map out an investment strategy, and help you with legacy planning (estate planning), and other financial goals.  

In the end, you have a lot of financial flexibility to pay down/pay off debt, invest, and/or do both.  

Good luck to you and your spouse!

July 2018
July 2018
July 2018
July 2018