As the title says, 40 year old business owner doing about 20-30k monthly in a 4 year old business. Have 220k saved and owe about 200k on the house at 4%. Married with two young kids.
The 220 sits in VOO mostly with about 40k in BTC and small gains in both
The business fluctuates wildly and I have no clue whether this will or will not last forever as it’s not recession proof.
I’m considering paying off my house for peace of mind. Though I know that 220k compounding over the next 20 years makes sense on paper.
Looking for advice from others on both sides of the debate.
40yo – Pay off mortgage or keep investing
byu/Old_Proof_7535 inpersonalfinance
Posted by Old_Proof_7535
12 Comments
Paying off cheap, long term debt is a financial mistake.
I would fix your investment portfolio though.
If you have inconsistent income and don’t see it lasting then being debt free, even though low interest rate, makes more sense than it would usually.
You’re running a fairly high risk profile at the moment with inconsistent income, the no risk return on the mortgage repayment looks attractive
Keep investing, you have a great interest. Beside the financial freedom, you don’t gain much. Keep investing and watch that $$ grow
That interest rate is low enough that you should keep investing and pay off the house over time.
On my last refi, I dropped to a 10-year 2.8% (from 15 at 5.875%). The monthly nut was higher, but it may have been the best decision I made. Made my last payment the month I retired.
I wouldn’t pay off a 4% rate mortgage any faster than required.
And I would stay away from speculation like bitcoin.
But both are personal decisions you get to make for your own peace of mind without regard to what anyone here says. It’s your money to spend in ways that please you even if it doesn’t make financial sense.
Congrats on the recent business success! From a pure money management standpoint, keep investing rather than paying off your mortgage early, is usually the best plan. History demonstrates that money in an S&P 500 over the long term will outperform the amount of interest you are paying on your mortgage.
That being said, there is still some value in additional peace of mind. So I think a dual approach may be an option worth considering. Rather than paying off your mortgage in full you could consider just paying it down quicker over time. One or two additional payments a year or overpaying it by a fixed amount every month. For example if your mortgage is $2k a month you could pay $2,300 a month to help accelerate paying it off.
A paid-off house hits different when your income depends on customers continuing to exist 😭
The bigger question is how much liquidity do you need to have on hand, especially given the volatility of you business. Dumping into a mortgage that is essentially on par with HYSA or MMFs could potentially leave you with having to access higher cost lending , e.g, HELOC, if things go south.
It is real simple. Factor in cost of the debt after tax benefits and compare with expected earnings. Are you better off retiring debt at accelerated rate, or using that money to generate income? Then re evaluate every few months
Like when the market tanked during COVID, I invested heavy in the market and bought lots of blue chip stocks at fire sale prices. Then a few years later I did profit taking and we paid off our home early.
In general, you want to be in the market now,, at least if you are invested in tech, AI, and at least some energy stocks.
I’m not a fan of paying off the mortgage for the idea of peace of mind.
If you have 200k sitting there that’s many, many months of mortgage payments and is actually better for handling whatever life throws at you.
With that said, it’s not a binary choice. You can do a mixture of both.
Just pay off the mortgage and completely own something while you still can
Are you an entrepreneur that will grind in a new venture if this goes under? Pay off your house.
Are you a risk averse person who’s looking for stability and will go to a median income job after that with some underlying training or credential? Invest it.