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What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: d4
Date: August 05, 2020 09:36AM
Poll
What would you do? Leave 100k in the stock market, OR cash out and pay off entire mortgage.
Only registered users are allowed to vote for this poll.
34 votes were received.
Let it ride. Leave the money in the stocks. 23
 
68%
Cash out. Pay off the mortgage you fool. 11
 
32%



What would you do?
Keep $100k in the stock market. OR, cash out and pay off your entire mortgage.

At 45yo, I'm not close to retirement.
I'm in year 8 of 30 year mortgage. Decent interest rate.
Letting the stocks ride for another 20 years seems like a no brainer. But living with no mortgage constantly hanging over my head sounds so stress free. I'll probably live longer as a result!


Baseball AAPL been berry, berry good to me.” With apologies to SNL.



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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: bobinmurphy
Date: August 05, 2020 09:45AM
At your age you've got a lot of time before retirement so I'd compare the interest rates of you mortgage against the average return rate you're seeing in your market investments. If your mortgage rate is more than your investment returns, pay off the mortgage.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: mikebw
Date: August 05, 2020 09:53AM
EDIT: Nevermind!



Edited 1 time(s). Last edit at 08/05/2020 09:55AM by mikebw.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: mattkime
Date: August 05, 2020 09:56AM
I have strong opinions on this that I can back up with numbers. The return from the market should be greater than the interest rate on your mortgage. You'll never get cheaper money than you get from a mortgage. There's also opportunity cost - once money is paid on a mortgage you never have access to that money again whereas you can always get access to your investments. What else do you need to know?

That said, some people have a very low risk tolerance. Why does it stress you out?

If the mortgage is hanging over your head, maybe your need to find a better place to store it. winking smiley







Edited 1 time(s). Last edit at 08/05/2020 09:58AM by mattkime.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: modelamac
Date: August 05, 2020 09:58AM
You have to take into account the appreciation on the home. Those monthly payments are not just paying off interest; they are investing in your home.



Remember how when you were little
you could just rip off your diaper and
just run around naked and everyone
thought it was so cute and funny?


Anyway, I need bail money.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: graylocks
Date: August 05, 2020 10:05AM
ride it out.

how good is your interest rate? mortgage rates are low right now. run the math to see if refinancing makes sense for you. if you do that also look at 15 and 20 year rates.



"Success isn't about how much money you make. It is about the difference you make in people's lives."--Michelle Obama
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: d4
Date: August 05, 2020 11:10AM
Quote
mattkime
That said, some people have a very low risk tolerance. Why does it stress you out?

An extra $1000 bill every month can stress anyone out smiley-shocked003

But I hear everyone's comments.
If I was to sell my stocks, now's the time while the market's riding high...



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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: sekker
Date: August 05, 2020 11:20AM
The worry is that the stock market is due for a COVID correction.

We discussed this very question at my household. What we DO with the money that isn't putting it in the stock market?

We are not sure ourselves.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Filliam H. Muffman
Date: August 05, 2020 11:24AM
>> The worry is that the stock market is due for a COVID correction.

agree smiley

It really depends on how safe you think your income is. If you pay off the mortgage, you will NEED to put 110% of your mortgage payment into stocks for the next 10 years to balance things out.



In tha 360. MRF User Map
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: d4
Date: August 05, 2020 11:37AM
Quote
sekker
The worry is that the stock market is due for a COVID correction.

What do you mean by COVID correction? Are you talking up or down?
Covid vaccine is near and economy will jumpstart. Up?
Covid second wave is coming and/or vaccine is not 100%. Down?



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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: anonymouse1
Date: August 05, 2020 11:39AM
Just refinance--you may be able to get a lower rate 15 year which will cost the same, or even less, than you are paying on your current 30 year. Check out aimloan.com - we like them.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: freeradical
Date: August 05, 2020 11:40AM
Trying to time the stock market...never works
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: anonymouse1
Date: August 05, 2020 11:43AM
Short of another Great Depression, it took 8 years for S&P 500 to recover from the 2000 crash, and 6 years to recover from the 2008 Great Recession. So that's a baseline, IF you buy at the absolute trough. Presumably you'll be spacing purchases over time, which will mitigate any peaks and troughs.

[fourpillarfreedom.com]

Quote
Filliam H. Muffman
>> The worry is that the stock market is due for a COVID correction.

agree smiley

It really depends on how safe you think your income is. If you pay off the mortgage, you will NEED to put 110% of your mortgage payment into stocks for the next 10 years to balance things out.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Speedy
Date: August 05, 2020 11:43AM
Quote
d4
Quote
sekker
The worry is that the stock market is due for a COVID correction.

What do you mean by COVID correction? Are you talking up or down?
Covid vaccine is near and economy will jumpstart. Up?
Covid second wave is coming and/or vaccine is not 100%. Down?

Down. Once the government stops stimulating the economy by no longer supporting people, it will only be the Fed supporting those who don’t need support.

Refi to 15 years or less.



Saint Cloud, Minnesota, where the weather is wonderful even when it isn't.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: NewtonMP2100
Date: August 05, 2020 11:52AM
....the market tends to out perform over the long term but no guarantee......the interest on your mortgage should be low......so........



_____________________________________

I reject your reality and substitute my own!
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Robert M
Date: August 05, 2020 12:14PM
D4,

Right now, mortgage rates are incredibly low. It's the cheapest money you're going to buy. If you haven't delved into refinancing, then definitely do so. We did and we're saving hundreds per month. I have an excellent contact for mortgages. I'll PM you his info if you want it. The money saved by refinancing _and_ by not paying off the mortgage is being invested carefully. We'll do better doing this with the bucks than if we just paid off the mortgage.

Robert
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Yoyodyne ArtWorks
Date: August 05, 2020 12:18PM
You young whippersnappers may not realize that the 30-year mortgage is a relatively recent phenomenon. For decades the standard mortgage term was 20 years. The amount of interest you pay on a 30-year mortgage is obscene, now is the perfect time to refi to a 15-year mortgage.

BTW, back in the Sixties virtually nobody (except people who traveled for business) had a credit card, and the idea of a 60-month car loan was unthinkable. Hell, if you didn’t pay cash for your car some people considered you a bit of a loser, and that would have involved a 24-month or 36-month car loan.

Now stay off my lawn!



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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: mattkime
Date: August 05, 2020 12:29PM
Quote
Yoyodyne ArtWorks
You young whippersnappers may not realize that the 30-year mortgage is a relatively recent phenomenon. For decades the standard mortgage term was 20 years. The amount of interest you pay on a 30-year mortgage is obscene, now is the perfect time to refi to a 15-year mortgage.

Can you please bring back those property prices?



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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: A-Polly
Date: August 05, 2020 12:29PM
Just a thought: what kind of taxes will you have to pay if you cash out that much money from the stock market?
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Ombligo
Date: August 05, 2020 12:52PM
Quote
A-Polly
Just a thought: what kind of taxes will you have to pay if you cash out that much money from the stock market?


I'm guessing that most will be long-term gains, so likely 15%. If the money is in a 401k or IRA, then add 10%. So not only are you losing 8%-10% stock gains to save 4% for mortgage, you may also be giving $15k to $25k to Uncle Sam.

My suggestion - Leave the $100k in the market, refinance the mortague to a lower rate, , then put everything you can towards added principal payments. You may take the payment time from 15 years to five years. When you pay off the house, continue to pay the mortgage to your retirement fund.



“No persons are more frequently wrong, than those who will not admit they are wrong.”
-- François de La Rochefoucauld
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Buzz
Date: August 05, 2020 12:54PM
If you sold 100% at 100 mid Feb, and bought back at 72 late March, you'd have bought back about 139% of what you had before. Now at 106, you'd be at 204% of where you were in Feb. If your basis was 33, you have a tax bill due at the end of the year of ~10 - 15, depending on your state. If things stay the same from here on out, you're at 190 - 195 at year's end. If things go up or down from here, the tax owed is the same.
==
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: kurtzie
Date: August 05, 2020 12:56PM
Quote
mattkime
Quote
Yoyodyne ArtWorks
You young whippersnappers may not realize that the 30-year mortgage is a relatively recent phenomenon. For decades the standard mortgage term was 20 years. The amount of interest you pay on a 30-year mortgage is obscene, now is the perfect time to refi to a 15-year mortgage.

Can you please bring back those property prices?

Careful you might have to take those '70s interest rates too…
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Grumpyguy
Date: August 05, 2020 01:01PM
hookers and booze wasn't a choice....



Bryan
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Todd's keyboard
Date: August 05, 2020 02:23PM
A-Polly mentioned taxes.

Aren’t there several aspects to your tax situation? Don’t many people in the US use interest rates on mortgages to lower income tax?

I currently have a similar situation, with a slight twist. Sold a house in the US and am wondering if I should transfer the funds to Canada to pay off a mortgage. Canada tax laws do not provide deductions for mortgages.

Todd’s undecided keyboard
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: JoeH
Date: August 05, 2020 02:56PM
Quote
Todd's keyboard
A-Polly mentioned taxes.

Aren’t there several aspects to your tax situation? Don’t many people in the US use interest rates on mortgages to lower income tax?

I currently have a similar situation, with a slight twist. Sold a house in the US and am wondering if I should transfer the funds to Canada to pay off a mortgage. Canada tax laws do not provide deductions for mortgages.

Todd’s undecided keyboard

With recent US tax law changes, getting a deduction for mortgage interest payments is less likely. Many people who used to get a higher deduction by itemizing which included that interest are now best using the standard one.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: anonymouse1
Date: August 05, 2020 04:20PM
Robert M-please see my PM. Thanks!
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: srf1957
Date: August 05, 2020 04:35PM
Call this person .Dave Ramsey.

A couple of weeks ago was listening to him and someone asked that ? He had a very good reason for that person to pay off mortgage .
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Ammo
Date: August 05, 2020 06:19PM
I’m a little confused about choosing a 15 or 20 year mortgage over a 30 year one. If you have a 30 year, don’t you have the option to accelerate payments if you choose to? That seems more flexible than committing to a shorter loan.



Be kind, for everyone you meet is fighting a battle you know nothing about. —Wendy Mass

Until you make your unconscious conscious, it will direct your life and you will call it fate. - Carl Jung
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: graylocks
Date: August 05, 2020 06:23PM
Quote
Ammo
I’m a little confused about choosing a 15 or 20 year mortgage over a 30 year one. If you have a 30 year, don’t you have the option to accelerate payments if you choose to? That seems more flexible than committing to a shorter loan.

rates are typically lower for a 15/20 year mortgage. plus, psychologically, if one can handle the payment it feels more like a forward move when you're already 8 years in to go to a lesser term than returning to start with a 30.



"Success isn't about how much money you make. It is about the difference you make in people's lives."--Michelle Obama
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Ombligo
Date: August 05, 2020 08:54PM
Quote
Ammo
I’m a little confused about choosing a 15 or 20 year mortgage over a 30 year one. If you have a 30 year, don’t you have the option to accelerate payments if you choose to? That seems more flexible than committing to a shorter loan.

Good point. The 30-year will always give you the option of paying less per month than the 15. In a bad situation that can be nice fallback position. Just pump everything you can into principal payments. You can also make two payments a month (even if one is partial) to reduce the payout time.



“No persons are more frequently wrong, than those who will not admit they are wrong.”
-- François de La Rochefoucauld
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: freeradical
Date: August 06, 2020 12:20AM
Quote
Ombligo
Quote
Ammo
I’m a little confused about choosing a 15 or 20 year mortgage over a 30 year one. If you have a 30 year, don’t you have the option to accelerate payments if you choose to? That seems more flexible than committing to a shorter loan.

Good point. The 30-year will always give you the option of paying less per month than the 15. In a bad situation that can be nice fallback position. Just pump everything you can into principal payments. You can also make two payments a month (even if one is partial) to reduce the payout time.

IIRC, making just one extra mortgage payment per year essentially turns a 30 year mortgage into a 20 year mortgage. Or something like this. This works because in the early years of a mortgage, you're primarily paying interest. It's not until you get to somewhere around the 15 year point where a payment is basically half principal and half interest. The 13th payment in a year is applied 100% against the principal.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Ombligo
Date: August 06, 2020 05:42AM
Quote
freeradical
Quote
Ombligo
Quote
Ammo
I’m a little confused about choosing a 15 or 20 year mortgage over a 30 year one. If you have a 30 year, don’t you have the option to accelerate payments if you choose to? That seems more flexible than committing to a shorter loan.

Good point. The 30-year will always give you the option of paying less per month than the 15. In a bad situation that can be nice fallback position. Just pump everything you can into principal payments. You can also make two payments a month (even if one is partial) to reduce the payout time.

IIRC, making just one extra mortgage payment per year essentially turns a 30 year mortgage into a 20 year mortgage. Or something like this. This works because in the early years of a mortgage, you're primarily paying interest. It's not until you get to somewhere around the 15 year point where a payment is basically half principal and half interest. The 13th payment in a year is applied 100% against the principal.

That is correct. You gain a bit more by making biweekly payments as it reduces the amount the interest is factored on. So if you can afford to pay an additional $400/month towards principal great, if you can pay that as $200 every other week even better.



“No persons are more frequently wrong, than those who will not admit they are wrong.”
-- François de La Rochefoucauld
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: rz
Date: August 06, 2020 08:49AM
Just remember, not all lenders will automatically apply extra payments to principal.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: NewtonMP2100
Date: August 06, 2020 08:59AM
....yes, you have to tell them to apply to principal.....and some may not allow extra prepayment or charge fee [ not sure is these still exist but they used to exist ]......



_____________________________________

I reject your reality and substitute my own!
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: JoeH
Date: August 06, 2020 01:03PM
Loan processor for the mortgage held by my CU only allows a single payment a month if there is not a different payment plan arranged. Extra amounts in the payment have to be marked as being towards the princpal, otherwise they can choose how to apply it which may not be as beneficial to you.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: stephen
Date: August 06, 2020 06:30PM
Last year I refinanced my AL place from 30 years to 20 years. Already have my GA place at 15 years. I couldn't quite make the stretch to two 15 year loans. But my rate and my payment came down nicely.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: mikebw
Date: August 06, 2020 08:18PM
Quote
JoeH
Loan processor for the mortgage held by my CU only allows a single payment a month if there is not a different payment plan arranged. Extra amounts in the payment have to be marked as being towards the princpal, otherwise they can choose how to apply it which may not be as beneficial to you.

This seems so scammy and predatory. Not want.
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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: mattkime
Date: August 06, 2020 11:01PM
Quote
mikebw
Quote
JoeH
Loan processor for the mortgage held by my CU only allows a single payment a month if there is not a different payment plan arranged. Extra amounts in the payment have to be marked as being towards the princpal, otherwise they can choose how to apply it which may not be as beneficial to you.

This seems so scammy and predatory. Not want.

Too bad you can't chose your loan servicer.



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Re: What would you do? Keep 100k in stock market OR cash out and pay off entire mortgage?
Posted by: Racer X
Date: August 07, 2020 08:38PM
Quote
modelamac
You have to take into account the appreciation on the home. Those monthly payments are not just paying off interest; they are investing in your home.

Amen to that! Most of the time my equity/home value is climbing faster than my mortgage payment. Only reason right now I tolerate the rest of the Seattle-idiots.



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