Should I pay off the mortgage sooner?

8 Replies

Pardon me if this sounds like a beginner's question. I have an investment property with 2 tenants paying off the monthly mortgage (30 year fix @ 4.25%) leaving me with a little less than a 1k a month. I’m debating whether I should really dedicate all my funds in paying off the mortgage in 10 years or should I instead use that money for the down payment to another property which is one of my goals. I really enjoy living debt free. Any advice?

debt is perfectly fine if you can A) service it B) outperform it. By all means build up a reserve so you don't have to stress over it, but if your goal is to get another property then save up for that. Debts are cheap now.... save away.

I personally would use the money to buy more investment properties. My business model has me buying $100k sfr's with 12% or better ConC returns. In 10 years I hope to buy around 20 properties or more. At that point I would be bringing in at least $6k a month in passive income. That's a lot more than I would make by paying off my mortgage early.

sorry can you explain this terminology a bit :

" sfr's with 12% or better ConC returns"

@Sergio Martinez , Don't let your best decision be robbed by the "smartest" decision.  If you love to live debt free then do it.  Make sure your primary is paid for first.  Then attack the investment mortgages.  Once your primary is paid for you've got a truck load more security if you wanted to stretch a little. 

But unless your goal is X$ by Y date ta heck with comfort and risk then enjoy the ride and be comfortable.  The market will come back to you and you'll be ready.

There's a lot of performance pressure to maximize.  Sometimes it ain't worth it.

If you’re past expansion mode, take all the cash flow from your properties and direct it toward one mortgage. It’ll get paid down a lot faster and since you’re not using more of your own money, it won’t inflate your returns

Paying off a mortgage on a income property such as yours with a interest rate of 4.25% will earn you exactly that ..4.25% the savings on your mortgage.

Most investors would expect a minimum return on cash of 10%. Paying down your mortgage is then costing you 5.75% in lost income.

People that enjoy being debt free would be farther ahead to park their money in a income investment fund or REIT than actually  buying brick and mortar. They would make a greater return and would not have the liability issues of owning property and dealing with tenants.

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