Let me say this, I'm no financial genius. Just trying to see if there's some options that I'm not considering. I'm going to be selling a couple of rental properties that I've been renting out for over 20 years. They are paid for. I just did major remodels on the bathrooms, the roofs are fairly new and they are in good shape. I'm just tired of it and want to cash in my chips.

I've consulted with my accountant/tax preparer and I know what my approximate tax liability, after the sale, will be. I should have a good chunk of change left over. My dilemma is what to do with the money. I still have a mortgage on the house we live in. I could pay that off, live mortgage free, and still have some cash left over.

I just don't know if that's the smart thing to do or if I should just keep the mortgage and put the money into some other type of investment.

I know that there's probably no one right answer but I'd like to hear maybe what some of you have done when in a similar situation.

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'Merica!

It improves your cash flow situation. We (wife and I) were able to pay off our mortgage seven years ago just before we retired, and are very glad we did. We’re now living off our retirement income and don’t have that large monthly payment to the Bank. The money is still there, just in the house. A funny side story to our mortgage payoff. When we went to our Credit Union to payoff our mortgage, we were told, that by the terms of our mortgage, we needed one more month before we could payoff the mortgage penalty free. We asked if we could payoff some of it now, as we were there at the CU. They said sure, just as long as there was something owned for that last month. So, we paid off everything except for $1.29 - we left a mortgage balance of $1.29 for the last month. We told our kids - “See that hinge on the front door? That belongs to the CU for one more month, but everything else is ours!”
A month later we walked into the CU with one hundred and twenty nine pennies and paid off the mortgage. Even the CU manager got a laugh out of it.
My recommendation would be to paid it off.

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"Your other right........."

I'm no financial whiz, but I'd pay off the mortgage.

G-Mac, were I in your situation, I would pay off the mortgage. It's one less thing you'll have to worry about.

It depends on how far you are in paying off the mortgage,though that’s probably the most stress free route.If it’s mostly just principal left,I’d be tempted to invest the money in a nice mix of stocks instead

While some Accountants tell their clients to have a mortgage deduction, there is no feeling like owning a home free and clear. These days the interest rates are so low on mortgages, the deductions are not all that much. Yes - when you have no loan to pay you are letting lots of money sit there (in your home) earning nothing, however to find a solid investment now that you can use that money for and be secure is hard to find now.

While I am not a CPA or an Accountant - I paid mine off many years ago - just a great feeling. If I ever did need the money I could always take another one. It's not like you could take the money and invest it at a high rate of return - so what the heck, pay it off.

Get rid of the mortgage and then have a look investment opportunities with the left over money.

Normally I'd agree with that, but solid investments are now paying very little interest. Yes - there are higher rates that can be earned, but at much higher risks. I'd not want to invest the lions share of your nest-egg in risky things when you are retired. No one likes be be retired and be forced to go back to work because they lost most of their money.

The Stock Market is so high right now and we've just had a Regime change which could change that on a dime. Couple that with the fact our National Debt is now 28 TRILLION, things could drastically change - it's happened many times in the past! Not saying one shouldn't invest a portion in high interest / higher risk things, but be careful with the lions share!

Living in your own home that is fully paid for gives one a feeling of security that is worth more than money in my opinion.

I paid off my 30 year mortgage in 9. Some said not to. They were wrong. Although my real estate tax bill is now as high as my mortgage use to be, it could be worse. Oh wait..is that the tax assessor at the gate?

As we all know, we never own the property. The county does and if we don't pay our ridiculous rent they'll get someone else to and you're out.

I've paid off two different homes mortgage, both early. It is a great feeling.

One that I obviously can't stand for very long. My wife and I just bought her dream home about a year ago. Another 15 year mortgage!

It's not a terrible amount, but still I seem to be a man that simply can't stand prosperity!

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GOA
USA Shooting Supporter

Congratulations!

The stock market is near record highs and there are no guarantees on future returns. I wouldn’t put the full amount in the market right now. If you were to place the cash in a 2 year CD, you’d be lucky to earn about 0.75% interest and that would be taxable income.

The best sure thing you can do is to pay off any high interest debt. If you’re carrying any credit card debt, pay it off and don’t do that again! Your next highest interest would be either a vehicle loan or your mortgage. Pay off whichever has the highest interest rate, or both.

I’m going to guess that you’re paying at least 2.75% interest on your mortgage and you’ll be using the standard deduction when you file your taxes, so the mortgage interest isn’t deductible.
Paying it off now will guarantee 2% more return than a CD for the life of the mortgage. Banks currently offer some 2% loans, so you’ll be doing as good or better than a bank!

Once the mortgage is paid off, you’ll have a surplus of cash each month. If you and your wife are eligible for IRA contributions, it would be a good idea to fund ROTH’s for both of you. I believe the maximum annual contribution is $7000 per person, you can access the principal without penalty any time and any gains are tax free at retirement. I’ve had good luck with diversified market based mutual funds. I suggest putting a good chunk of the previous mortgage payments into the ROTH’s each month. That way, you spread out the risk and buy more shares if the market suffers a correction. Long term, that’s the safest way to maximize returns and minimize risk.

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"I also cook."

As others have said - Pay Off the Mortgage!

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Bill

Pay Mortgage.

Pay it off. You can't get the interest rate elsewhere, that you're paying as interest on the mortgage.

Variables like your age, health, marital status, and guaranteed income versus expenses come into play.

If you can already comfortably cover your expenses with your income, and have a reasonable expectation of living three years or more, then you should be able to put the cash to work and net more than the pay-off would free up.

We used to live pay check to pay check, and it was not fun. One day I put us on a budget, started saving money, bought a house. Then we paid additional principle every month until we paid it off in 12 1/2 years. It was the greatest feeling.

I created a Excel spreadsheet that calculated the amount of interest we saved each month, the remaining balance etc. I always enjoyed looking at it when we made a payment and it calculated our balance.

We are not rich, but we don't owe anything except our monthly living expenses. It's a blessing from God.

Have a blessed day,

Leon

Pay off the mortgage. Get an investment advisor and invest the left over in a diversified portfolio. And that mortgage payment you are not making, take some or all of that and put it in your investment account each month.
I did that, 25 plus years ago and it’s paid off in spades.

What does your tax/accountant recommend?

I sold two houses when I moved several years ago and IIRC I needed to reinvest the monies into another home to avoid a big bite (I did).

A consultation with a tax attorney may save you big bucks.

The stock market is the last place I'd put money right now.

My last refinance on my primary residence resulted in an interest rate of 2.51%. I am making more that that, after tax on a number of investments that are liquid and low risk. Rather make money then just reduce debt. Some of those investments are REITs that can be used in 1031B Like Property exchanges to defer capital gains also. There are REITs paying from 6 to 10% interest right now.

Bob

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Sag Harbor & Manhattan, N.Y.

We paid off our mortgage 2 yrs ago and life has been a lot more stress free.

I would probably pay it off but re answer is not that cut and dry anymore.
I have a rental property I have a mortgage on and I could pay it off but I don't because The rent covers the mortgage, insurance, taxes and we put money the balance toward mortgage ever ymonth. WE also own our house that we paid cash for in 2019. We did not want to have a mortgage. That in itself is very freeing. I just retired a year ago and not having that monthly payment is very nice plus is something goes sideways westill have a home that is debt free. In fact we are completely debt free except for the rental.
In summary:
1.On paper it's better to invest and keep mortgage (assuming it's a low interest rate)
2. Wise men has always taught me to get your house paid off as soon as possible. IT does improve your monthly cash flow.
3. Most financial people from the older crowd (me included) say to pay off mortgage first but that was when interest rates were at 5, 10% even 14% (1980s) The are now under 3%
4. We paid ours off (paid cash) even though we didn't have to for peace of mind and a hedge against some unforeseen catastrophe and cash flow.
5. We didn't pay off rental property because mortgage is covered by tenants.

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John 1:17
NRA Life Benefactor

Being debt free is a blessing that cannot be over emphasized. Pay off the mortgage.

I made it a point to not have a mortgage when we retired.

I worked tons of overtime and the stock market was running on overdrive, so I accomplished that easy. By selling my present house at a very good profit allowed us to build a new year around house up at the lake. IMNSHO it was probably the best finical move I have made.

Good luck from one blue collar to another, Dave

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14 S&W Revs none with locks!

My thoughts

you sell your rental property , you now have a "bucket" of $$.

The $$ that you owe on your home is prob at a great interest rate right? 4% or less ?

This is the cheapest $$ that we can borrow from a bank.

I would NOT pay off the mortgage.
I would invest this money, find mutual fund that will pay you 7%+

The problem I have with all these esoteric real estate strategies (1031, 721, UPREIT, DST, blah blah blah) is they can all be undone with the stroke of the pen on tax legislation. Something along those lines may very well be coming.

Plus, those sort of things tend to illiquid. I would not describe 6-10% yielding REITs as low risk. But risk is relative.

Generally, I’m a debt-free kind of guy. Especially if you’re approaching retirement. There’s a lot of freedom in not having a mortgage.

But... mortgage rates are so low right now, I’d consider splitting the difference. Pay down part of the mortgage and invest the rest in high dividend yield blue chip stocks.

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Vegan by proxy.

No right answer for you here, everyone has different circumstances, think it over with family.

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Sure you did

No kidding, my taxes are so high I'm about to pay for my property for a second time just in taxes. I say pay it off.

Sgt911 I wish you and anyone else paying very high property taxes would list what state you live in; I'm considering moving, and don't want to move wherever that may be.

I'm a slow thinker, so it'll probably be years before I make a decision - maybe life will make it for me.

Texas. Fourth highest but no income tax.

When I moved the last time I paid cash for my house. For me it was
a dumb move. While it was great not having a house payment I lost
the tax write off. Looking over my investment portfolio I have earned
8% over the last 10 years with Vanguard. It would have been much
smarter to have a mortgage to write off on taxes and make money
on the rest.

Nice to see a financial whiz concur!

When I retired last year, in the planning with my finial guy I said I wanted to pay off the house with some of the annuity moneys. He talked me out of it and instead to pay in thirds, as then there will be more money in the investments to make money. I paid $15K last summer, and made that money back. Just paid 15K this month and will pay it off next January. for me, that's the best way because I have no problems with paying my monthly mortgage with my pensions, and I would basically blow the $700/month that I would have extra. (Once it's in my pockets it just burns right through.)

It depends on what rate your loan is. If it’s as low as many right now, 3.5-5 percent, you’ll make more by investing in the market right now.
You said you’ll have a good bit left if you pay it off which is important for emergencies, etc.
Pluses and minuses to both routes and only you can determine what’s best for your situation. Freedom from mortgage payments can lower stress if that’s important, but only if it doesn’t leave you house rich but cash poor.

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“Look life in its iron face”

I posted earlier (post 24) and forgot to put this in.

By not having a mortgage as you get older/retire it makes you life a lot simpler. That is one big bill that you do not have to pay monthly.

It gives you more freedom to do other things. Examples a better car/truck, another car/truck, better vacations, invest in the market, more S&W guns just generally having a easier time by not paying that long time loan.

Yes its a big move, give it a lot of thought and do the right thing for you and your family!

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14 S&W Revs none with locks!

G-Mac, I recommend you talk with a financial expert before making a BIG financial decision. The only comment I will make is; Being debt free is the only way to build wealth!!!!!

I am always "amused" by people quoting the "tax deduction for mortgage interest". So you like the idea of paying $5 to gain $1 back for the first 15 years of a 30 year mortgage. It is not until you have a taxable income in excess of $200K that the return is as high as $1 in $5. Simply look at your terminal federal tax rate to see what the return is on that "tax deduction". Today, if you take the standard deduction (and you have to have >$24000 in deductions) to not take it, you actually get less than $1 per $5. Dave_n

The tax deduction is way overrated.

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Sure you did

We saved long enough to get a down payment on a small fixerupper house and then got married. With both of us working we scrimped and saved and after 3 years paid it off. Then we started our family. 14 years later we built our dream house. We took out a bi-weekly 15 year mortgage and paid it off in 11 years.

The mortgage free years allowed us to put together quite a nice nestegg. Monthly "payments" to a credit union savings account enabled us to pay cash for every new car we ever bought.

If you have a mortgage with interest lower than savings or a CD, then that's your choice. There is no greater investment than being debt free!!!

Of course, generating a positive cash flow using others money ain't bad either.

With the tax law changes a couple of years ago, the deductions pretty much went away. We had two houses because of where we worked (160 miles apart), and even with that interest the deduction for the last couple years was nothing. Seriously - only got the standard deduction. Even with significant payments and charitable deductions.

We had paid the first house down pretty well, and did not realize how high the values had become. My wife got a tenure buyout offer that seemed worthwhile and we sold that house. That paid off this house, and then the reduction in expenses allowed us to pay off her (3 YO) car, then we paid off mine with the reduction in expenses and part of her buy out.

In less than 4 months we went from 2 house payments and two car payments to none. She takes a token amount off her pension and we live just fine on my income, plus we have a decent savings account for planned future expenditures. Even at low interest on the loans, the interest on savings is nearly meaningless. Pay it. If future economic problems arise (pretty likely), you will probably be better off.

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NHI, 10-8.

On the contrary; we refinanced and used our equity to payoff other debts (paid down student loans, credit cards, etc.). We figured we are both 70 or over and our payments are less than rent would be. We figure it'll still be there when we die and my estate can worry about it.

Think about the money you are GIVING to the bank each year. We paid this one off in 8, and aside from having to take the standard deduction, we have more money in the bank. BTW Georgia is a pretty good state on retirement income.

I Have used my money and borrowed money for a number of different types of investments.
End game, you want to be debt free with significant Net Worth.
Real Estate Notes - works well here in NM, recommended
Car Dealer Floor Planning - NOT RECOMMEMDED
Retail Car Paper - RUN, FAST
Rental property - hard to believe the lies folks will tell you.
Do they really expect me to believe that?
Allows you to examine the worse side of of the Humanoids.
Lease Paper- ok, maybe
Flipping Real Estate and creating Notes- $$$ Have made a pile.

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NRA LIFE MEMBER

We paid off our mortgage many years ago and it was a great feeling and I felt like it was an accomplishment.

Life happened and we ended up in serious debt and had to take out another mortgage. We suffered for years until I retired and was able to pull out some money from investments without serious penalty, just Federal taxes. We had things like credit card debt and I used the money to pay all that off, leaving the mortgage, which was had at a good rate.

My investments are doing well, so I'm not inclined to pay off the mortgage right now, but I'll have to examine our finances closely and this year I may end up paying it off depending on our cash flow. We haven't quite settled yet on our new situation but should know more in a few months.

I don't think I'm making enough on the investments to cover a house payment every month so it would probably be best to retire that debt.

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"He was kinda funny lookin'"

We are in a similar situation. We sold our previous, paid-off home and purchased another, taking advantage of the historically low interest rates. We now have enough cash to pay off the new home, but we also have an investment portfolio that yields several times the mortgage interest rate. If things with the portfolio remain the same (big if, I know), we could invest about 2/3 of the cash and within a year draw enough annually to pay the mortgage and taxes without impacting the initial investment. We really like the 'no mortgage' option, but are also intrigued by the idea of letting earned interest pay for the house. Not sure yet what we'll do, but there are worse positions to be in.

The mortgage would have already been paid off. Another way of looking at it. Would you mortgage a paid for home to make investments? Some might, but I would not. We paid our 30 year mortgage off in 12 years, and never looked back. I don't do car notes either. Once you break the payment cycle, and diligently save buying the next car you need becomes much more enjoyable, and entertaining instead of dreaded. I do keep one credit card to buy gas, and such on just to keep my credit rating up, but it is paid off each month. There was a time in this country if a man had a car note he wasn't considered bankable for a home loan my how times have changed. Good luck with your decision.

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Randy

Pay off your debt and increase what you are putting in a Roth and 401K. Getting rid of debt leaves you flexible. The other option before Covid would be to buy a business. i would put that on hold over a mortgage.

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Front sight and squeeze

pay it off... the peace of mind given buy lifting that monthly burden from you shoulders is amazing.. that alone is worth more than the small amount of profit you "may" make.. and if you do make it you get to pay taxes on it too... happy is priceless... it worked out well for us.. I ended up involuntarily covid retired last March... without any mortgage or car loans we get by on one income just fine... of course having invested my old mortgage payment for the past 12 years has created a nice pillow to land on... I am only 54 and may not got back to work full time after the plague subsides... like I said.. happy is priceless