Flipper/Rehabber · San Diego, CA · Member since 2016 · 17 posts · 4 votes
Hi Everyone,
I'm looking for some advice (Pros/Cons) whether I should invest my extra income into a savings vehicle that will essentially guarantee me a 7% return annually or if I should put the extra money to paying down the mortgage on my home. I really want to retire early and since the Mortgage is the biggest hit to my monthly income, not to mention the interest expense, I was thinking that should be my first plan of attack. Any ideas or insights which path would be most beneficial?
Real Estate Agent · Burbank, CA · Member since 2012 · 271 posts · 79 votes
7y
What is your mortgage rate? If is less than 7%, invest the money and when you decide to retire, pay the mortgage all at once with the money that you invested in the REIT.
I'm looking for some advice (Pros/Cons) whether I should invest my extra income into a savings vehicle that will essentially guarantee me a 7% return annually or if I should put the extra money to paying down the mortgage on my home. I really want to retire early and since the Mortgage is the biggest hit to my monthly income, not to mention the interest expense, I was thinking that should be my first plan of attack. Any ideas or insights which path would be most beneficial?
Thanks in advance.
If you're looking into guaranteed returns I would look into an Annuity or IUL. RE is great and these are my 3 favorite things to invest in.
Flipper/Rehabber · San Diego, CA · Member since 2016 · 17 posts · 4 votes
7y
@Shaun Weekes Thanks, I haven't really looked into a IUL but definitely will. I have a REIT that gives me 7% annually and even more when I reinvest the dividends. I'm just wondering if it would be a better use of funds to pay down the mortgage instead?
Real Estate Agent · Burbank, CA · Member since 2012 · 271 posts · 79 votes
7y
What is your mortgage rate? If is less than 7%, invest the money and when you decide to retire, pay the mortgage all at once with the money that you invested in the REIT.
Flipper/Rehabber · San Diego, CA · Member since 2016 · 17 posts · 4 votes
7y
@Ciprian L. Actually, that's not a bad idea at all. The mortgage interest rate is only 3.75%. I was concerned with all of the upfront interest expense after looking at the amortization table. The Interest and Principle don't even equal each other until around year 16. It's all front loaded with interest payments. The banks gotta make there money!
Rockville, MD · Member since 2017 · 74 posts · 13 votes
7y
Maybe do 50/50 or some other split: put some money toward mortgage and invest the rest? One additional pro of paying off your mortgage early is once you do it, the place you call home is yours and the bank can't take it away. Of course, if you feel very optimistic about your future, and/or you are years away from paying off and might want to buy a bigger house etc etc then maybe this is not so important. Also, you cannot get back the extra $ you have put toward extra principal in case something bad happens (such as loss of job) and you need extra cash.