Recently sold a rental house and has enough cash between sale proceeds and savings to pay off rest of the mortgage ($900k at 7%) on the primary house. Should I pay pay off the mortgage, or invest some in SP500?
Lives in HCOL, dual income in high tax bracket.
Pay off 7% mortgage vs invest in SP500?
byu/sapporoshioramen inpersonalfinance
Posted by sapporoshioramen
8 Comments
Can you do a 1031 exchange?
I would probably just pay it off for the peace of mind. If the interest on the mortgage was lower my answer would be different
Paying off the mortgage is a guaranteed return. Invest the monthly mortgage that’s no longer being paid (this is the most important part).
Ensure you’re handling taxes and the sale of the property in the most tax advantaged way.
I think it depends on how much you already have liquid. If you have a large liquid portfolio then sure, pay off the house. If you don’t, then you should use the cash to start one. I wouldn’t want to tie up all my wealth in a house.
Pay off the mortgage. The 7% interest will continue accruing at a rate that you can accurately calculate and pay off. The SP500 is speculative may not be a guaranteed return like paying off the mortgage.
In this AI boom? I would take a guaranteed 7% over the next however many years rather than invest in in the current market.
Pay it off. Guaranteed return of 7% over remaining life of mortgage vs risk of S&P500 returns. While the latter is tends to be higher, it comes with risk. And I wouldn’t risk my home over it.
Do you have other taxable investments? Are you trying to retire early?
I wouldn’t choose all to SPY with a 7% mortgage. But I might do 1/3 or even 1/2 depending on the answer to those 2 questions.