Would it be better to invest or pay down mortgage?
 

I have somewhere in the neighborhood of 150k sitting in a low interest account (~4.5%), and want to move most of it. My job is fairly demanding on my time, so I am looking at either putting most of the money into index funds (spy, dia, vti, qqqq, etc.) or paying down my mortgage.

I owe a little more than 300k on my home, with a 6% fixed rate mortgage (~28 years left). Home value is probably currently somewhere between 600k - 700k. I am 40 yrs. old, married with 2 small children.

Which option do you all think would be better in the long run?

Re: Would it be better to invest or pay down mortgage?
 

You're likely to see greater returns in the market. The question is can you handle the risk?

It sounds like you have at least a decent amount of wealth so I'd say throw it in the market and continue to pay your monthly payments.

Re: Would it be better to invest or pay down mortgage?
 

[ QUOTE ]
I am looking at either putting most of the money into index funds (spy, dia, vti, qqqq, etc.) or paying down my mortgage.

Which option do you all think would be better in the long run?

[/ QUOTE ]

What are your goals? If you want to retire in 5 years, I'd say pay down the mortgage. If you want to retire in 30 years, probably the market.

Re: Would it be better to invest or pay down mortgage?
 

If you pay off your house you can pretty much retire or work at a lower paying job closer to home full or part time.

Re: Would it be better to invest or pay down mortgage?
 

Statistically, you would do better in the market but that takes discipline and risk. Paying down the mortgage is risk free and you will sleep easier.

Re: Would it be better to invest or pay down mortgage?
 

Make sure your 401k's , IRA's are maxed out every year then pay down the mortgage with any extra?

Re: Would it be better to invest or pay down mortgage?
 

[ QUOTE ]
I have somewhere in the neighborhood of 150k sitting in a low interest account (~4.5%), and want to move most of it. My job is fairly demanding on my time, so I am looking at either putting most of the money into index funds (spy, dia, vti, qqqq, etc.) or paying down my mortgage.

I owe a little more than 300k on my home, with a 6% fixed rate mortgage (~28 years left). Home value is probably currently somewhere between 600k - 700k. I am 40 yrs. old, married with 2 small children.

Which option do you all think would be better in the long run?

[/ QUOTE ]

You're 40 years old with 2 small children and 150k in savings. You are probably looking at retiring in your 60's (at the earliest) given that scenario.

Since your investor window is about 20 years minimum, you should definitely get your 150k more aggressively allocated than a mere 4.5% interest bearing account, and even more aggressive than just getting a guaranteed 6% return (which is what you get by paying down the mortgage).

Think of it this way. You're already heavily invested in property at a 2-1 ratio to your other investments (your ~300k in equity). that is a VERY conservative allocation already.

natedogg

Re: Would it be better to invest or pay down mortgage?
 

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Think of it this way. You're already heavily invested in property at a 2-1 ratio to your other investments (your ~300k in equity). that is a VERY conservative allocation already.

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OP, is this $150k all of your savings?

Re: Would it be better to invest or pay down mortgage?
 

Although the stock market offers higher return, I like paying off your mortgage more, especially if you don't have mortgage insurance in case something happens to you and you want to make sure there's a place for the kids to sleep.

Re: Would it be better to invest or pay down mortgage?
 

You could also consider becoming a private lender to real estate investors. With the banks tightening up on the loans right now, you could easily get short term returns (1-5yr) of 11-15% or more . Look into it on some of the REI forums link. Of course don't do this on a whim, research it and then decide if it fits your plan. Alot of people don't even realize that this avenue of investing exists.