Pay off house or invest money?

Answer 1

my rule of thumb for this is to reduce debt if the interest rate on the debt is over 1/2 my long run average rate of return for the asset i'm thinking of investing in. I ignore taxes when I make this comparison.

in the present market, I'd say you really have to know your stuff to expect to receive more than a 12% annual return, so I'd pay off debt if the interest rate on the debt was 6% or higher.

Answer 2

I would say you are wrong to a certain extent Spock. I mean Im only 15 years old and have a 40% gain in the 4 months ive been doing this with real money. Ive only been interested in the stock market for about a year now. If you are sure you can make more of a percentage gain in the stock market than the interest rate on your house then I say invest money. But the stock market provides no guarantee these days. If you have never invested before then just pay off your house. But my dad could pay off our mortgage significantly faster than he is, but he thinks he's better off investing that money in the stock market where he can make much better than his interest rate. It makes since to me. But I wouldnt risk a mortgage payment (if its the only free money you have) on the stock market. Because then if you lose all your money youre screwed;-)

Answer 3

Weigh your priorities. If security is the highest priority, then pay off the house. It's a great feeling to pay it off and a great weight off your shoulders. You can sleep easier. If growing your money and savings is the higher priority, then diversify across some riskier investments with the potential for more growth. You may never again have this great of a lump sum to invest, the opportunity to to make significant sums of money through investing.

Answer 4

Pay off house. Then use the money you will earn in the future to invest. Plus you won't have to worry about mortgage payments anymore.