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georg11
First Time Poster
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| Pay off Mortgage or Invest in real estate? |
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I have a small concern which I hope someone here could easily clarify. I am paying for my home mortgage for past 6 years and about 9 years or payments remains. I also have good savings, which I am planning to invest in real estate. I was looking for good properties, when I came across this article by a mortgage broker about the exact topic:Should You Pay Off Your Mortgage Or Invest?. It got me think about whether to pay off the mortgage before any kind of investment. What do you say?
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Tue Feb 07, 2017 10:16 am |
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nicholas_n
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| Re: Pay off Mortgage or Invest in real estate? |
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quote:
Originally posted by georg11
I have a small concern which I hope someone here could easily clarify. I am paying for my home mortgage for past 6 years and about 9 years or payments remains. I also have good savings, which I am planning to invest in real estate. I was looking for good properties, when I came across this article by a mortgage broker about the exact topic:Should You Pay Off Your Mortgage Or Invest?. It got me think about whether to pay off the mortgage before any kind of investment. What do you say?
Get on a written monthly budget and pay the mortgage off. If you do that, you will almost certainly pay off your mortgage much more quickly (i.e., in well less than nine years). Once that is done, save up and pay CASH for any investment properties.
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Fri Feb 17, 2017 5:07 pm |
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oldguy
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quote:
Get on a written monthly budget and pay the mortgage off. If you do that, you will almost certainly pay off your mortgage much more quickly (i.e., in well less than nine years). Once that is done, save up and pay CASH for any investment properties.
I did the opposite, I bought my 5 houses (4 rentals) with mortgages. My thinking is that saving up the cash for a house is going to take 10 years for most people. For 5 houses it wold take 50 years. I bought mine in a 5 year period with minimal down payments. And then I owned the group of rentals for 35 years - during the 35 yrs my renters paid my mortgages for me - and each house earned about $250,000 in that time.
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Fri Feb 17, 2017 6:39 pm |
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christcorp
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I sort of do/did a combination of what Oldguy and Nicholas are saying.
1. For my PRIMARY RESIDENCE which I live in; I want that paid off as soon as possible. You can handle getting laid off; fired; other emergency; etc. if you don't have to worry about a roof over your head. Possibly having to sell and lose on it. So for the house I live in, I want to pay that off as soon as I can. You don't make money on that house; and it's costing you more than it's worth because of interest. Even a 3 or 4% loan I want to close as soon as possible. Don't want to pay interest; and don't want to be saddled with a financial hardship if some SHTF scenario hit me.
2. The Real Estate "INVESTMENT" is a totally different story. Don't look at it as a HOUSE or a MORTGAGE. Simply look at it as an investment. As long as you know you can rent it out for more than enough to cover the mortgage, taxes, insurance, and occasional upkeep; then borrow money and invest in a real estate property. Even if you only hold it a few years, and sell it; you're not out anything. You aren't using YOUR money to pay the loan/taxes/insurance/etc. Also be prepared for a couple months of vacancy. That could happen too. So don't invest in a 10-15 year mortgage where the monthly payment might be more than you can rent for. Get a 30 year loan on it. Again; it's not your money you're paying with. You're just wanting to build equity.
Do this; and if you can, add more to YOUR MORTGAGE so you can pay it off sooner. Don't put down any more money on your investment property than you MUST. As Oldguy mentioned, plenty of us have been able to get mortgages with little or no money down. But use your normal income and if you have a large profit margin in the rental; to finish your primary residence mortgage as soon as possible.
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Fri Feb 17, 2017 7:24 pm |
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