Pay off House or do something else with money

5 Replies

Hey Guys, quick question. Would paying off my mortgage be the best thing to do if I had the chance to? I purchased a house and fixed it up. The whole plan was to keep it as a buy and hold. It was a joint venture with a family member also. The family members plans changed over time and I have since paid off the family member as they wanted out. I also sold the home to some friends of family on contact and now they are to the point of getting their own loan for the house and thus paying me off. Wasn't really planned that way but it is not what it is.

I am trying to decide what the best thing to do now is. With the money from the sale and a little extra I could pay off my house and then save me over $400 a month on interest. I can then redo my line of credit to take full advantage of the equity in my house. Or what might be everyone's thought on that situation.

Pay it off man and don't leverage against it afterwords either. Use other people's money to invest if you don't have capital. I believe in free and clear.

Couldn't disagree more. A home loan is some of the cheapest capital out there. If you can borrow at 3-4% and invest it at a higher rate, why wouldn't you do that? Otherwise you are leaving money on the table...a lot of money. I believe in owning property on the balance sheet, not out right.

Reworking your LOC is certainly a viable alternative depending on what your plans/goals are for the money. Just don't keep your equity locked up. It's your money so put it to work for you.

I wasn't planning on the sale of this place but if it happens then I would like to be able to use the money somehow. I have a LOC now for only about 50K that I use when needed. My thinking was to pay off the house and then redo the LOC for $150K so then I have access to some of the equity in my house but at the same time not paying interest on something if I am not using it.

I like the idea of having no debt... personally I'm not there yet, but it sure would give me peace of mind. I know a great investor near me and he uses debt when needed to buy rentals but his goal is to have 20 homes free-and-clear in addition to his own home. I think he's very close. The nice thing for him was that he was not at all affected when the economy took a down turn in 2007; his rent checks just kept coming in funding his lifestyle and other investments. In the end there's an argument for both sides of this and I think it's a personal decision and has a lot to do with your tolerance for risk.

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