Mortgage (debt) over Investing, Anyone else?

[prohornblower]

If you had $0 in investments, but owned your townhome, would you borrow against your townhome to invest?*

*Assuming you could get the same rate borrowing as your original mortgage.

[ThePost]

Jus some more information here

* I do have a number of months of cash available in ING as an emergency fund. (10k)

* I'm not a professional poker palyer (web programmer), but do play part time to help out with the $$$

Interesting question about borrowing against the townhouse if I had paid it off. I don't believe I would, unless
1) Had other funds invested that I could liquidate and pay off the debt if need be
&
2) The investment was extra special (Which I don't really know what that would be). Plus if it was, I'd likely sell my "regular" investments anyways.

Basically I think it'd be very unlikey that I would take out a loan against the townhouse after paying the mortgage off.

[Nomad84]

[ QUOTE ]
Interesting question about borrowing against the townhouse if I had paid it off. I don't believe I would

[/ QUOTE ]

I just voted for pay down the loan based on your answer to this question.

[vilemerchant]

What's the rush? Take your time paying it off and give inflation time to devalue your debt imo.

[Leaky Eye]

How quickly are you going to pay it off? Do you anticipate being able to maintain payments based on your work income alone?

If you are going to pay it off in, say, 20 years instead of 30. Then for those twenty years you are probably buying yourself a false sense of security. You still have to make your monthly payments, and having liquid assets on hand is of more value in making payments than having less total debt.

For those saying happiness is most important. You still need to beware trading greater long-term happiness for immediate gratification.

[Nicholasp27]

once house is paid off, u need significantly less liquid savings for expenses, as mortgage is usually about half or more of ur monthly expenses

utilities will run u a few hundred a month, a few hundred for car/insurance, few hundred for prop taxes/home insurance, then what u need for gas, food, etc....

[KennyBanya]

Post,

A good guideline is to try to invest 10% of your pretax income. In the US you would want to max your 401(k) and take advantage of Roth IRA if eligible. I am not sure if there is a Canadian equvialent for these. You want to get the whole compounding of interest thing going as soon as possible. You also want to get any free money from your employer and tax deferrment and/or exemption that you can.

Then attack your mortgage with gusto. This is not to say getting rid of that mortgage is not an extremely worthwhile endeavor. Another benefit of paying off your mortgage is the whole risk management aspect. With zero debt and growing assets your risk of ruin is about as low as you can get it.

Once your mortgage is off the books, you can build your wealth even faster.

Peace,

KennyBanya

[ThePost]

It's true that inflation would cause the debt to decrease in real terms. But once the mortgage is paid off, I can invest my additional money which is basically the reverse side of this equation.

In Canada we have whats called an RRSP for government savings. I am maximizing this contribution each year as well.
* This is the only investment I have outside of the mortgage. I basically use the tax advantage for funds towards the mortgage.

If everything goes to plan I will have the mortgage paid off in full in aprox. 4 years. (I am making double payments and paying off 15% of the mortgage each year).

Right now I feel rather confined in what I can do professional , and I believe eliminating my debt will give me a lot more freedom. It's much easier to start a new business, when you don't have to pay the mortgage each month.

[mindflayer]

Since i am a Canuck
i will give you my 4c
(everyone else not a canadian = 2c in value for info)

The First ivestment past that 25%
down payment is RRSP. if your RRSP contribution its maxed out then do whatever.
if not, Invest in your RRSP First.

[NL__Fool]

[ QUOTE ]
Since i am a Canuck
i will give you my 4c
(everyone else not a canadian = 2c in value for info)

The First ivestment past that 25%
down payment is RRSP. if your RRSP contribution its maxed out then do whatever.
if not, Invest in your RRSP First.

[/ QUOTE ]

I disagree, I'm Canadian and I think RRSP's are way overated.

The problem with RRSP's are that when you put money into them, if you ever take out any money before the age of 69, you are penalized & then taxed on it, So you are losing anywhere from 35-50% of what you take out depending on how much you take out.

So if you decided in 15 years you wanted 50k for some reason and you are not 65 you are going to pay about 20-25k of that back in penalties and interst when you withdrawl.

There are a lot of other options out there available to Canadians that allow for almost as much income at retirement while at the same time givng you the flexability of using your money without being penalized on it.

I would hate to be 50 years old, have a great investment opportunity arise and not be able to take advantage of it because my money is tied up in RRSP's