Now there it sits with no opportunity to grow.
Unexpected cash=pay off mortgage?
- Thread starter coalcracker
- Start date
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
...until you carefully consider how you would like to invest it. Then it's available rather than [-]pissed away[/-] gone or invested in something you regret.
You mean like a house....until you carefully consider how you would like to invest it. Then it's available rather than [-]pissed away[/-] gone or invested in something you regret.
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
No, that is not what I meant. I was thinking more along the lines of spending it to buy a lifetime subscription to the Fruit of the Month Club.
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Now, now, take it easy ole boy. Merry Xmas. I apologize if I offended anybody. Especially someone who has been a stalwart of this community for as long as you have.
DoingHomework
Recycles dryer sheets
- Joined
- May 28, 2010
- Messages
- 254
We are doing something that I have not heard mentioned here as a possibility. We have a mortgage on a rental property at 4.625% that we just refinanced in early 2011. Rather than prepay it, we are taking what we would have used to prepay and putting it into a designated, and separate, corporate bond fund. So far it is earning a bit more than what we would get as guaranteed return from mortgage prepayment. If all goes to plan the balance in the fund will exceed our mortgage balance when we retire. At that point we can decide whether to pay it off or just stay liquid.
On an objective basis I think it is a tough call in our situation to decide whether to prepay or invest. Prepaying the mortgage is risk free but the corporate bond fund carries a little risk. I think this approach is costing us around half a percent after adjusting for risk but in my opinion that's worth it for the liquidity of having the money available if we need it.
So, what you could do is take some of the money, whatever your mortgage balance is, and set it aside in a designated account that is always there to pay off the mortgage if/when you decide to do so. In the meantime it would throw off enough income to pay your mortgage payments. If you take this route though you must be very cognizant of risk. Don't go and throw it in an emerging markets fund. Stick with something like government bonds or similar.
On an objective basis I think it is a tough call in our situation to decide whether to prepay or invest. Prepaying the mortgage is risk free but the corporate bond fund carries a little risk. I think this approach is costing us around half a percent after adjusting for risk but in my opinion that's worth it for the liquidity of having the money available if we need it.
So, what you could do is take some of the money, whatever your mortgage balance is, and set it aside in a designated account that is always there to pay off the mortgage if/when you decide to do so. In the meantime it would throw off enough income to pay your mortgage payments. If you take this route though you must be very cognizant of risk. Don't go and throw it in an emerging markets fund. Stick with something like government bonds or similar.
Oh, it's received some air time over the years...
From the Early Retirement FAQ archives:
http://www.early-retirement.org/for...f-the-mortgage-or-invest-the-money-30644.html
and my personal favorite:
http://www.early-retirement.org/for...rtgage-without-losing-your-ass-ets-15237.html
and also:
http://the-military-guide.com/2011/12/07/covering-a-mortgage-in-retirement/
