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Should I use my $80,000 to directly pay off my mother's mortgage, or invest the money and wait for it grow before paying off the mortgage?

I need to help pay off the $117,000 left on my mother's mortgage, which reaches maturity in 2032. I have $80,000 in cash that I'm comfortable with putting toward the mortgage to lower the principal of the mortgage loan down to $37,000. We pay $1,020 monthly, so I'd have about three years of payment left if I put in the $80,000 right now. This home will not be the one I will be living in, I just need to set my mom up so that she will be okay to retire in the near future and not worry about paying her mortgage. I will eventually have to worry about my own future home mortgage as well, and I live in California, where the average home cost is above $500,000.

I can either use the $80,000 to make sure we pay off the house within the next 3-4 years, or I can use the $80,000 to invest, wait for the money to grow and pay off more of the home later on in the future (though within 5 years) because regardless of what happens, the mortgage payment will still be $1,020 a month. Refinancing to lower the monthly payment is not an option for us.

If investing is the better choice, a couple of questions there as well. Where should I invest? How do I invest? What are the tax implications of a short-term investment?

Debt, Retirement, Investing, Real Estate, Taxes
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July 2018


It’s a tough call.  Without revealing your age or knowing your personal finance, such as your debt, investment, retirement funding ,etc., it’s really difficult to give you the right guidance.

However, the general principal still stands:

1) Help yourself first before aiding others.  Let’s say you have some personal credit card debts with an interest of 18%, I would say to pay those off first.  If you’re debt-free and the retirement funds (401k and IRA) are well-funded in addition to have $80k idling somewhere, please do help your mom. 

2) Investing is never suitable for the short-term. Hoping to get a better return on an investment in five years is a gamble.  You could come out ahead, or you could lose big.  A safer way for a 5-year investment could be a short-term bond fund or a CD, at leas you don’t lose principal.  If the asset is invested in a taxable account, you would be paying an annual tax on the investment gain (unless it’s a muni bond fund), whether it’s a simple interest, income, or price appreciation.

To be sure you make the right decision, a face time with a CFP® is highly recommended.  Best! 

July 2018
July 2018