Thanks for all the detailed info.
Makes sense to keep on this path.
Many of you speak of investments. I thought they were only for the wealthy.
Can a person with only $50,000 to invest make it worthwhile? I can’t take much risk for that is
the total I would have to invest.
This Money is an inheritance not income that will repeat.
You can, but you have to think small.
A passbook savings account is about the most secure thing you can find, but it also pays the lowest interest.
A money market pays a tiny bit more interest with a tiny bit less security.
A conservative bond fund is very safe but still pays a little more than a money market.
Then you go through more aggressive bond funds, individual bonds, conservative through aggressive stock funds, individual stocks, real estate, and so on. More income potential, more risk.
You can open an account with a broker online for $1,000 (sometimes less) and add monthly deposits of $100 (or less.) That way you can get started but still keep most of your money safe and ready for an emergency.
Yes, what you should consider is the after tax cost of the mortgage interest v the after tax return on ‘liquidish capital’.
If the mortgage is 4% and you itemize* in a 25% total federal/state tax bracket (my state doesn’t have a mortgage interest deduction, others do, others have no income tax to begin with) it’s 3% after tax. What can you get in a low risk investment? almost surely less than that (10 yr US treasury yield~2.5%, 30yr ~3.1% pre tax; a 30yr mortgage due to the amortization is approximately equivalent to an 18yr bond, not a 30 yr). And much less in a truly liquid bank account ~1%. Having a mortgage to fund more investments in risky assets like stocks is fine if you want that risk, but viewing it as a ‘profit’ on the difference between what you hope stocks will return and the 3% is not a good way to look at it.
But as several have mentioned, you want to have at least several months of living expenses around in liquid low risk investments. The way to think of it is you might need to suffer the ‘negative carry’ of paying 3% AT on a mortgage balance to free up 6 months worth of expenses to put in the bank at 0.75% after tax.
The mortgage interest deduction is ‘wonderful’ relative to it suddenly not being there and everything else equal. However it doesn’t somehow make it profitable for you to borrow as a relatively risky credit, thus having to compensate the mortgage lender for the risk of lending to you, plus delivering some profit to them, and then turn around and deposit that money in an investment with (virtually) no risk to you, on which you also have to pay tax**. Thought of that way, it should be no surprise you’re unlikely to make money.
*if you don’t itemize it’s all the less attractive in return terms to finance bond purchases with a mortgage because you still have to ‘itemize’ income from the bonds.
**again some wrinkles are created in this depending on state taxation. Your state may have a mortgage int deduction, but US treasury interest is state tax free. But that doesn’t overturn the basic point in most cases.
I’d pay it off. (In fact, I did.)
The way I look at it is, every dollar paid in loan interest is a “sucker fee” and doesn’t add a penny to the value of the home.
If you use all your savings to get paid off, and then have an emergency, you can always get a home equity loan. But you’d be surprised how fast your savings accumulate once you aren’t paying that monthly payment with interest.
But that’s just me. Interest free since '03!
The other possible reason not to pay down a mortgage applies in places where banks can’t come after your other assets if you default on a mortgage. In my US state they generally can come after other assets, but in some states they usually can’t including the two most populous, CA and TX.
Say you have a $500k house in an earthquake prone area of CA and earthquake insurance is a few $1k a year with a 15% deductible (standard AIUI). You might be better off against earthquake risk with no earthquake insurance and a $400k mortgage. That limits your downside to $100k without paying any earthquake insurance premium (not required to get a mortgage). If you own the house outright you have to pay the few $1k a year and still have $75k downside from the deductible.
And just in terms of overall personal risk management, not setting out to stiff anybody or be a cheater, it’s worth something to be able to walk away from a house/mortgage combination at loss only of your equity, as a last resort if things go south for you personally financially.
But again in recourse states you can’t necessarily do that. In practice lenders don’t often come after other assets anywhere because people who default on home loans usually don’t have enough else to make it worthwhile, and some other types of assets (like 401k’s retirement accounts in the US) are shielded even when there is recourse. But hypothetically if somebody has a significant slug of money they are considering using either to pay down a mortgage or to invest in something else, this is another aspect to consider.
As long as your emergency hasn’t done something to impede your ability to earn a living. e.g. you won’t get a newly originated HELOC if you’re unemployed or unemployable despite all the home equity you might have.
Now you might have been smart enough to get a standby HELOC-like line of credit ahead of time but not draw on it. IIRC that’s been tightened a bunch since 2008 and banks now charge a fee for the privilege of you *not *borrowing their money once they’ve agreed to lend. Or they require you to borrow some decent fraction of the offered total every so often to keep the line alive. Yes, you can game them while they’re trying to game you. But it’s neither trivial nor cost-free.
We’re considering taking out all the money we have in the market, (25k+), and putting it on the mortgage, mostly because the markets seem pretty volatile just now. It means we’ll pay the mortgage off within the year. And we won’t have to worry about our investment losing value, whatever the markets do. We have an existing line of credit against the house that allows us to draw as much cash as we have equity. Which we don’t really use, but it’s good to have. And some ready cash at hand, in case!
It’s not mercenary at all. This is the world of investment, ownership, insurance, security, etc. Your parents planned wisely. I’m sorry you lost your Dad, of course. 
But don’t apologize for articulating very clearly the upsides to your situation.
Somehow I skipped over this post earlier.
Not disputing your story in any way. And I too ma glad to hear it worked out well for your Mom.
But I wonder how many people have mortgage payoff life insurance? And IIRC, like accidental death and dismemberment insurance, it’s usually pretty high margin for the insurer = bad deal for the consumer.
bottom line: If life insurance is desirable, it’s probably better to buy it directly, not attached to specifically protecting a mortgage.