Colli Real Estate

Should I make a lump-sum payment to pay off my mortgage?

Ten months ago I sold my house and reaped a significant profit. I bought a smaller home, and I realized that I could pay off the new mortgage (15 yr fixed @ 5%) with one lump-sum pmt from the profit from the old house. Is this wise? My thinking is, I will pay 75K in interest over the 15 yrs, or 30-40K if I prepay and reduce the 15 yr term to 8. Obviously the lump-sum pmt eliminates that debt. I’ve also always felt that paying interest, just to get 1/3 back at the end of the year as a write-off, was foolish. I’ve tried a bunch of calculators online, but I get conflicting results. Paying this off will not hurt my retirement plans, but I”m wondering if the money could grow faster if I invest it, and if so, in what. My tax bracket is 35%, monthly mtgg pmt (P&I) is about 1580. and total mtgg amount is $200K. I gross $150K+ per year, and have no other debts (I own my car, and pay all credit card bills in full).

I think you should talk with a CFP and / or a CPA, regarding your situation, to analyze and decide what your best options are.

Owning your home outright is a good feeling, but that’s all it is, a feeling…you get no benefits from not having a mortgage (other than not having to write a check every month).

Having a mortgage gives you a tax write off, as you said. But it also leaves you the cash you have on hand for other profitable ventures or investments.

Have you thought of using the money on hand to purchase rental properties? Using a property management company reduces the headaches involved, if that was a worry.

Investing in CD’s, Mutual Funds, or bonds might be a much more profitable avenue for you.

Again, you should consult with a CFP & a CPA about what your best approach is. I’m not a CFP or a CPA, but in my honest opinion, paying your mortgage off is not your best option available for you overall.

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