Investments? Or No debt?

[LauraG1]

I have a family member who is in a position to pay off their house; investment people of course say that's a bad decision, it's always better to invest.
But I have to agree with him that I'd rather be in the amazing position to be mortgage free: that's a given, you own the house, and any investment these days is uncertain.
So...what would you do? I just don't think I could sleep at night wondering if the market was going to crash and knowing my house could have been paid off!
I guess this gets into how optimistic are you about the economy (without getting political) or do you feel better having money in the bank, or not owing the bank a dime.
Fun to dream about at least...
Laura

[fatcat]

i'd want to pay off my house. I feel like the economy is so insecure, I'd like the security of no mortgage. Besides, then I could put all of that money towards investing every month.

Maybe I'd look into investing half, and refinancing the house using the other half to pay down the principle.

[jeninnc]

pay it off!!!!! No debt is better then debt anyday.

[mellow1]

With mortage rates so low, it is wiser to invest the money and get a higher percentage on the investment.

[zoeyz]

It might depend on the house and where it is and its resale prospects. There are some areas that I wouldn't want to own a house in; others, I would. I like the idea of paying off the mortgage, though.

[seals]

I think Suzy Orman would say make sure you/they/whoever have an ample emergency fund before doing either. If I had that, then for me it would depend on what kind of income and job/income security I had. It would be bad to have the house paid off but then have no income for some reason and no way to get the money out of the house for other needs.

[Val.]

I have a family member who is in a position to pay off their house; investment people of course say that's a bad decision, it's always better to invest.
But I have to agree with him that I'd rather be in the amazing position to be mortgage free: that's a given, you own the house, and any investment these days is uncertain.
So...what would you do? I just don't think I could sleep at night wondering if the market was going to crash and knowing my house could have been paid off!
I guess this gets into how optimistic are you about the economy (without getting political) or do you feel better having money in the bank, or not owing the bank a dime.
Fun to dream about at least...
Laura

Definitely pay off my house. That frees up more of your earned income each month to invest. And in this economy I think that having your home paid for is a huge security.

[arielle2]

I agree--you need some liquid assets. Probably six months to a year. You may need cash and not be able to sell your house, or not want to.

[mrd]

For me, I'd say invest...

especially if the mortgage rate is low and the monthly payment is reasonable. I'd also try and pay extra every month. But remember, if he doesn't have a mortgage payment, also can't write that payment off on taxes right?

Also, I feel very insecure unless I have some liquid money I can get to in emergencies.

[Tonia1]

No debt AND invest...

If it were me, I'd pay off the house, then use the extra money from not having a house payment to invest for retirement.

[Dawnn]

It depends on how old they are. They need to determine how many yrs left of work they have left, what their retirement funds look like. I think they should be maxing their 401k to the limit allowable by IRS and have no debt no intention of ever having credit card or car payments in future. They should have a big nugget of investments and also liquid reserves for emergencies of at least 1-2 yrs. I would say a mix of maxing out investment funds for the long term. The mkt is awful and may get worse short term given Greece debt default possibility which will make 2008 look like a walk in the park but will be a "long term" buy opportunity. They can make significant investments and Aldo send double payments on mortgage. They need to figure out how much time is left on the mortgage. Extra payments will go to princ. I would hate for them to put all their liquid funds into a somewhat illiquid asset since owning the house outright doesn't pay for groceries. I think they should ramp up both. They should read the money class by suzy orman or go to a non-commission financial advisor. I just paid off my 15 yr mortgage 4 years early by rounding up to higher payments and it felt great. I did a partial 30 yr 15 yr about 11 yrs ago fixed/variable. Then fixed both at low rates. The split the broker did was perfect for us. I highly doubt they do them anymore. Anyway now that the 15 is paid, I'm taking all those toward the 30 yr for extra payments (that mortgage is also amortizing w/an earlier maturity date of about 3.5 years. I'm ageek and re-run my amortization schedule once a month to see how much I've taken off the back end maturity (which will go even faster now that I'm redirecting more funds to it and maturity is well within my retirement age already and less than my annual income), and I maxout of 401k, college I have a it'd return on another retirement employy fund w/a guartanteed return and dh has a pension vested and annuity. I'm trying to say the de vision should not be all or nothing but a balance of both.

[Dawnn]

Sorry for typos I just typed that on my iphone!

[LauraG1]

Job security is good; emergency funds are in place and not an issue. House in good resale market, markets have dropped, but less than other areas. Holding it's value now I think.

[LauraG1]

True on tax writeoff; they have taken that into consideration.

[LauraG1]

I'm a geek too! I have my amortization table in excel and use it all the time to run different scenarios when we were refinancing etc.
What I would have a hard time with (and am with our own 401k stuff) is putting that money in the market, and then watching it go down (although intellectually I know I still own that much stock etc and it should go up), if my house was paid for, all other things being taken care of, that can't be taken away. I just don't know if I could sleep watching that money go down, and I agree, I don't think we've hit bottom.
I know...buy low sell high....but it's still hard emotionally to see it all lose value on paper.
Laura