Is it better to pay off the house or invest?

Question

I hate debt but want to do the smarter thing.

Answer 1

It's a risk-reward decision.

The effective cost of your house is your interest rate adjusted for tax deductions (exclude property appreciation, which would occur even if you paid the mortgage as scheduled).

As long as you can easily pay the mortgage, it's better to pay off all other debts that are not tax deductible such as credit cards. After that, invest in a Roth IRA if you are eligible.

Then decide on your time frame. I would personaly invest in mutual funds (low expense ratio, no load index funds). But that's because I'm willing to take the risk and I have a long time until I can retire.

In short, the answer varies on your time frame, risk tolerance, and age. If you can, perhaps you should consult a certified financial planner (make it clear up front that you will NOT buy any products from him/her - just an hourly fee for the advice).

Best of luck.

Answer 2

I think much better to pay off the house if you will, than to invest because if you pay off the house you don't have to worry about the process and the hassle to invest. If you have plan to buy a house try to visit this.

Answer 3

You need a financial adviser. Depending on you mortgage, if a balloon ... get rid of that sucker asap. If it is a 30 year conventional, you can pay a little extra on the Principal each month. That will build the equity faster. And you will still have some left for investing. I suggest you learn all the investment language (you can do that on the Internet) then see a professional to discuss your long term goals. And If you want to adopt, I am available 8~)

Answer 4

depends what rate (and fixed or variable) you pay on your mortgage, and what sort of long term average rate you can realisticly get from investments.

If you pay a 5.5% rate on a fixed rate mortgage, but are agressive and have a long time (20+ years) to invest and can get 9-10% return on investments, its better to pay your mortgage payment and invest the rest.

Most people don't have that kind of time or risk tolerance (this is another key - can you emotionally take losing 20% or more of your money in a bad year? most can't). Pay off the house, if that's the case.

Answer 5

Paying off the house is an investment.

Answer 6

Getting the house paid in full is great and the smartest investment. Imagine not having to make that mortgage payment??? If something happens, your house is YOURS. Once the house is paid, you can invest some or all of that payment monthly. Make sure you have a fully funded 401K plan which is also a sweet tax-free investment in your future.

Answer 7

If you can do both ... it is the best way.
Pay your mortgage down faster by paying weekly.
You mortgage principal will be paid off quicker and you can reduce your mortgage from a 25 yr term to a 17 yr term.
That is smart.
Each pay cheque you should try and have the bank deduct a small amount such as $100.00 or whatever you can afford , then direct it to an RSP. You should look into that with your bank.

Answer 8

Your house is an investment, since when you are in your late 60s, you can have a reverse mortgage where the bank pays you money. You can't be forced out of your house, but if you don't pay and die, they take the house unless somebody coughs up the money.

Answer 9

Pay off the house. You will save all the money that you would have paid in interest over the rest of the life of your loan. What you would continue to pay in interest would most likely be greatly higher than what you would make in interest on any investment. In addition, your house should continue to increase in value, as most homes build in equity. This proves to be an investment in itself, as you could borrow against it at a later date if you needed.

Answer 10

If you can get a better rate on your investments, great. If not, pay off the debt and make extra payments.