# Paying off my mortgage question
**URL:** https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488
**Category:** Factual Questions
**Created:** [November 2, 2023, 4:35pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488 "2023-11-02T16:35:08Z")
**Posts on this page:** 20
**Page:** 2
### Author:  [@Persimmon](https://boards.straightdope.com/u/Persimmon)
#### Post date: [November 2, 2023, 5:35pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/21 "2023-11-02T17:35:50Z")
Thank you. That was really helpful. So that does make sense if there is an investment that pays out more than my 4.67% interest rate. The question then is…what is out there that I can invest my 25k in that would pay out more than 4.67% and not just a little more like 5% but significantly more like at least 6 or 7%? If that is rare or hard to do, then it might just be best to tackle the loan?
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### Author:  [@Munch](https://boards.straightdope.com/u/Munch)
#### Post date: [November 2, 2023, 5:40pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/22 "2023-11-02T17:40:43Z")
> [@Persimmon](#):
>
> what is out there that I can invest my 25k in that would pay out more than 4.67% and not just a little more like 5% but significantly more like at least 6 or 7%?
These days? Not much, and they nearly all carry downside risk.
Also to consider - your house is also a wealth-generating asset, assuming it’s a good house that will appreciate.
Either way, if you’re not currently investing for the long term in a period of your life when you are earning considerably more than you’re spending, and have other expenses being met by your parents, you need to be doing so. Does your job offer a 401k? Do you have an IRA or Roth IRA open?
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### Author:  [@OldOlds](https://boards.straightdope.com/u/OldOlds)
#### Post date: [November 2, 2023, 5:42pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/23 "2023-11-02T17:42:55Z")
I’m not a financial expert, just a middle class, middle aged investor.
Money Markets are at about 5%, and CDs are at about 5.5%. Don’t kid yourself, those extras add up fast. Both are at the bottom of the risk ladder.
It is my opinion that if your total nut is $25k, that’s about the limit of your risk taking. Once you save a bit more, you could look at other investment options that carry more risk and more return.
Seriously, though- a percent here and half a percent there will make a massive difference over a lifetime. Don’t go straight to principal reduction because “one percent doesn’t matter.”
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### Author:  [@Jas09](https://boards.straightdope.com/u/Jas09)
#### Post date: [November 2, 2023, 5:44pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/24 "2023-11-02T17:44:12Z")
> [@Persimmon](#):
>
> If that is rare or hard to do, then it might just be best to tackle the loan?
@Munch has discussed it, but really you need to consider your overall financial situation and goals, not just this one loan and this one pile of cash.
What are you saving for retirement? How are you saving it? How is it invested?
What is your emergency fund situation? What future known expenses do you have?
What is your overall debt situation? What is your cash-flow situation on a monthly basis? What are your unavoidable fixed expenses (food, shelter, transportation, utilities)?
Then you can consider whether extra money should be kept in a liquid emergency fund or put in a long-term tax-advantaged retirement account or used to spend down debt.
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### Author:  [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)
#### Post date: [November 2, 2023, 5:46pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/25 "2023-11-02T17:46:25Z")
> [@Persimmon](#):
>
> Thank you. That was really helpful. So that does make sense if there is an investment that pays out more than my 4.67% interest rate. The question then is…what is out there that I can invest my 25k in that would pay out more than 4.67% and not just a little more like 5% but significantly more like at least 6 or 7%? If that is rare or hard to do, then it might just be best to tackle the loan?
Well, that _is_ the catch. There are no risk-free investments with returns well in excess of your mortgage’s interest rate. Anything averaging 6 percent or more is going to have some years where it suffers a loss, but for the most part you can mitigate your risk by investing for the long haul and not engaging in foolish tactics like trying to time the market (i.e. selling your assets when you think the market is about to crash and trying to reinvest when you think the market is about to recover).
There’s plenty of specific investment advice to be given, but that’s probably better for a thread in the IMHO forum.
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### Author:  [@Persimmon](https://boards.straightdope.com/u/Persimmon)
#### Post date: [November 2, 2023, 5:48pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/26 "2023-11-02T17:48:37Z")
No my current job doesn’t offer me a 401 and I don’t have any other investments ☹
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### Author:  [@RitterSport](https://boards.straightdope.com/u/RitterSport)
#### Post date: [November 2, 2023, 5:48pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/27 "2023-11-02T17:48:56Z")
Do you have any other debt? If so, what are the interest rates on those?
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### Author:  [@Chefguy](https://boards.straightdope.com/u/Chefguy)
#### Post date: [November 2, 2023, 5:49pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/28 "2023-11-02T17:49:58Z")
> [@Hampshire](#):
>
> If you can bump your payments to $1200 you’ll save over $80K in interest.
This is key. And if you can refi at some point for a lower rate, even better. We knocked over $100K off our loan some years ago by doing both and reducing the term from 30 to 15 years.
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### Author:  [@wguy123](https://boards.straightdope.com/u/wguy123)
#### Post date: [November 2, 2023, 5:50pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/29 "2023-11-02T17:50:43Z")
> [@OldOlds](#):
>
> Seriously, though- a percent here and half a percent there will make a massive difference over a lifetime. Don’t go straight to principal reduction because “one percent doesn’t matter.”
My wife and I hate having debt. So, we paid off our house aggressively and it had a fairly low interest rate. Sure, the extra payments could’ve gone into the stock market, but we ended up paying off a 30 year mortgage in 13 years and all those payments, along with the extra payments since have now gone into investments. For US, it made sense to pay off early. It’s not always a rationale decision but can be psychological. The freedom of having zero debt the last eight years has been great. And we are on a great path to early retirement.
With that said, putting it in a CD right now is a great option. But remember that you lose a percent of interest income so while you might get 5.5%, you have to deduct the portion you give to your favorite uncle (his name is Sam).
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### Author:  [@Munch](https://boards.straightdope.com/u/Munch)
#### Post date: [November 2, 2023, 5:53pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/30 "2023-11-02T17:53:40Z")
Speaking as a former financial advisor, my recommendation is to open up a Fidelity Roth IRA, max out your 2023 contribution of $6500, and spend some time over at the r/bogleheads Reddit forum. The general investment advice there is far more focused and consistent than it is here, where advice tends to vary with each new poster.
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### Author:  [@OldOlds](https://boards.straightdope.com/u/OldOlds)
#### Post date: [November 2, 2023, 5:54pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/31 "2023-11-02T17:54:02Z")
Well, yes. You do pay taxes either as income or as capital gains. But when comparing specifically to mortgage debt, you also have to account for the tax deduction there. So his 4.67% mortgage might be more like 4.2% (I don’t know his marginal rate, or if he itemizes).
My mortgage is at 3.25% and I was paying it aggressively. When MM and CDs went to 5-ish% I stopped doing that. Now I pay the minimum and put what I was overpaying into money markets and CDs. That money is still there if I need it.
FWIW I also hate debt. It took me a long time to retrain myself.
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### Author:  [@Persimmon](https://boards.straightdope.com/u/Persimmon)
#### Post date: [November 2, 2023, 5:54pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/32 "2023-11-02T17:54:27Z")
No other debt. I know there’s such thing as good debt, but I don’t know it well. I’ve always just been a good saver and frugal spender. So while I can save up nearly 70% of my annual income, the downside is I don’t know about investing and don’t have any investments other than buying an apt (if that is an investment). I figure that paying off your house is the biggest expense in your life outside of any serious health emergency/sickness. So if you can own a house/property then you should be able to live off a modest income since you won’t have much else to spend on besides basic needs like food and utilities.
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### Author:  [@RitterSport](https://boards.straightdope.com/u/RitterSport)
#### Post date: [November 2, 2023, 5:54pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/33 "2023-11-02T17:54:30Z")
Yes! Roth IRAs are tax free forever, so that 5.25% T-bill interest will remain 5.25%.
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### Author:  [@wguy123](https://boards.straightdope.com/u/wguy123)
#### Post date: [November 2, 2023, 5:58pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/34 "2023-11-02T17:58:34Z")
> [@OldOlds](#):
>
> But when comparing specifically to mortgage debt, you also have to account for the tax deduction there.
We could only itemize for the first years so we no longer had that benefit. But you are correct that if OP is able to use the mortgage interest deduction, they have that going for them.
Being debt free has allowed us to max out our IRAs, 401s, including the over 50 “catch up” (well, my wife isn’t yet 50) and save quite a bit on top of that (I am currently buying CDs monthly with the spare extra money).
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### Author:  [@RitterSport](https://boards.straightdope.com/u/RitterSport)
#### Post date: [November 2, 2023, 5:59pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/35 "2023-11-02T17:59:28Z")
I think the mortgage interest deduction is basically dead at this point.
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### Author:  [@Persimmon](https://boards.straightdope.com/u/Persimmon)
#### Post date: [November 2, 2023, 5:59pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/36 "2023-11-02T17:59:38Z")
I can understand this route too. It can definitely pay off in the long-term, but in the short-term I’ll just have this nagging mortgage to keep paying off and my linear mind likes to get one thing out of the way as soon as possible before moving on to the next thing haha. I suppose taking it slow and easy paying off mortgage and investing the rest into long-term investments that can pay off later is only good if it’s greater than the total interest I’ll be paying over the 30 years of the mortgage? I guess this is how it sort of works? It’s like mapping out 30 years into the future financially and seeing what route ultimately will save/make me the most money?
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### Author:  [@RitterSport](https://boards.straightdope.com/u/RitterSport)
#### Post date: [November 2, 2023, 6:00pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/37 "2023-11-02T18:00:31Z")
Or, if rates come down in the future to the point where your other investments are earning less than the mortgage, pay it off then.
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### Author:  [@Riemann](https://boards.straightdope.com/u/Riemann)
#### Post date: [November 2, 2023, 6:04pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/38 "2023-11-02T18:04:07Z")
never mind, already mentioned
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### Author:  [@Horatius](https://boards.straightdope.com/u/Horatius)
#### Post date: [November 2, 2023, 6:05pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/39 "2023-11-02T18:05:00Z")
> [@DCnDC](#):
>
> However, making a large lump sum payment directly to the principle should drastically reduce the _amount of interest you ultimately pay_.
Yeah, this. Reducing the principal while paying the same weekly or monthly payment means more of each payment goes to also paying down the principal, so you can actually pay the whole thing off much faster. Unless you’re pretty sure you can get a better return via investing, this is a safe option for a guaranteed benefit.
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### Author:  [@Horatius](https://boards.straightdope.com/u/Horatius)
#### Post date: [November 2, 2023, 6:09pm UTC](https://boards.straightdope.com/t/paying-off-my-mortgage-question/992488/40 "2023-11-02T18:09:42Z")
> [@Persimmon](#):
>
> So basically, if I can increase my monthly repayment and pay off my loan faster, is better than to
> take your time and pay it off over 30 years? Are the loan guys tricking us into making us repay it over a long time at lower monthly payments because they know they will make more money off of us??? They don’t want us to pay it off as fast as possible?
It’s not really a trick, it’s that most people don’t find it quite so easy to save as much as you as fast as you are. Long repayment terms are the only way they’ll ever own a house. If you can afford double the payment every month, and the bank is willing to accept it, paying things off faster will always save you money (see the math above).
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