I'll never understand why more people don't simply do both? Let's say you have an extra 1k a month every month. Why not invest $500 per month and pay and extra $500 a month towards principle too? Seems like no downside here. Paying off mortgage early and making money in the stock market at the same time.
Would you take money out of your house to invest in the stock market? Choosing to invest instead of paying off mortgage is the same thing just in a different order
We chose to pay off my house early.A 30 year loan we paid off in 10 years by making an extra principal payment every month. Because our jobs we get laid off. And the peace of mind is the best feeling.
Silly. Principal payoff money sits in the bank and makes you no money. Imagine having loan now and you were investing that $200K or so that is making 12% minimum each year for the past 10 years. You would have have the money to make payments without jobs or just pay it off and have all that extra money you acquired from investing.
I posted on one of your earlier videos about paying off my mortgage early. I’m happy to report that I will be done the first part of 2025. I’m gonna get it down to a low amount and make one big payment, before February. Thank you for posting videos like this to keep me and others motivated.
Life doesn't go in a straight line for anyone : there is sickness, accidents, heartbreak, job losses, health changes, cars beaking down, increasing taxes, devorce and food prices just to name a few. 30 years of life is a different thing.
Your final calculation is flawed. You can’t add the “interest savings” on to the balance at the end for the scenario that paid the house off early. While they “saved” $83,000 in interest on the loan, they “lost” the capital of the invested account of the investor. Both scenarios paid $851.68 +$350.00 a month for 30 years. They both contributed a grand total of $306,604.80 from their earnings over 30 years to their home loan and investment account. At the end of the 30 years the one that paid their home off faster had a paid off home and an investment account worth $257,664, and the investor had a paid off home and an investment account of $324,111. You could say one had more piece of mind, but from a purely apples 🍏 to apples 🍎 comparison they both had a paid off home in 30 years and the investor had an extra $66,447
You are right. The last calculation of value impact is wrong. It is what they have in thier pockets at the end of 30 years. But until that part he took a great example in a realistic comparision
If investing guy gets laid off before 2009 he could have used a portion of his investment to pay the monthly mortgage until he found another job. Not putting the whole investment value towards the mortgage balance, just selling enough of the investment to pay the monthly bill temporarily if his emergency fund didn’t cover it.
You could invest in something that pays dividends, then use all the dividends as extra towards your mortgage. You will grow that portfolio, then year after year you're paying off your mortgage more and more aggressively. Then when you no longer have a mortgage you have a big portfolio paying you.
My mortgage is $406 a month, that's p & i, property taxes and home owner's insurance. We've overpaid the principal ever since our first payment was due paying far more towards principal than interest, Knocked years off of the life of the mortgage in 3 1/2 years and did it with an SSDI income. And we bought at 2.875% zero points.
Lol yeah trying to add this in is such a blow to this guys credibility!! That amount is solely reflected in the mortgage being paid off faster and cannot possibly be added in at the end!
The "both factor is also a fair strategy for something like VOO pairded with SCHD, or a VTI paired with a a SPY. Get the long term value, get the dividend, and maybe toss something to a crypto that could be sold if need be. Get that ROTH action, and capitalize on employer or Robinhood Gold contribution matching. Get the perks that work right for you!
You still need to pay property tax (which is generally growing every 1-2 years), insurance, HOA, maintenance. You will never be fully free from monthly payments.
The third option, splitting between investment and mortgage, was my option. I spent 18 years, instead of 15 years or lower, to pay off my primary house and was able to invest. I am 52 and comfortably semi-retired.
paying off the mortgage gave me peace of mind in case things don't go well in my job especially during covid when i decided do pay off one of my rentals. Once the first rental was paid off i used the rental income to pay off the second come while i invest and save money from my w2 job in the stock market. I just purchased another home and im planning to do the same on the 3rd rental. This might not be the best strategy but it definitely gives me peace of mind while keeping my debt as low as possible.
All that matters after the 30 years is the invested amount man. Interest saved is already baked into the time you're able to invest extra after being paid off, that 83k doesn't matter bro.
I'm paying off mine early with $400 extra monthly (less than halvies). It's more about peace of mind. I want to retire in 10 years, and I want to own my home before then and have no debt at all. It will change everything, even if I might lose out on some money if I invest that instead. Happiness is more valuable.
Best answer: It depends. Is there going to be a years-long bear market and high mortgage rates like the 1980's? Or low interest rates and a strong bull market for many years to come? We can't know for sure. We're also assuming the returns of the S&P 500 index alone. What if they invested a big chunk into something that totally tanked? (It's happened to all of us.) I honestly don't know what the correct answer is, but I'd be interested to see how the "halfsies" math came out. I know people personally that invest mainly in CDs and bonds for that "guaranteed money", but pay more % than that return on their mortgage rate. Still many years from paying it off. I can't follow that logic, but whatever floats their boat. I don't tell other people what to do with their money.
Roth IRA, employer match, maybe a bit more into the 401K or some stocks, and then try to pay off mortgage early. I do agree many financial experts just say stocks will outpace the mortgage, and it's not always going to be true, especially at these high rates. I'll take peace of mind of having a paid off mortgage, then trying to mess around with long-term ETFs and hope for the best
I feel like both ways work great. I feel like it really depends on where you want to spend your money. Paying off your mortgage will help ease up your life, but if you could work through it you can have more money at the end. I do the half and half approach. Would love to see the numbers. I invest more than I put extra into my mortgage. I do an extra $100 a month and at the end of the year my mortgage broker gives me 1% back because of the deal I got which is nice.
I have a liquid account, a Roth IRA, and I'm paying quick on my car loan and student loans. It's made me over $12k this year alone! I'll be debt free AND making a good amount on my investments in 3.5 years. Cross your fingers!
Being a numbers person I love these scenarios! I actually went to biweekly and upped my payments after your last video of these. I completely agree I want peace of mind. THEN... When you have those dips you can afford to buy more!!
Id do (and currently am doing) a debt recycling strategy. Its kind of doing both. Pay down mortgage while investing and the intetest repayment becomes tax deductible
All these issues stem from an economy grappling with uncertainties, including housing problems, foreclosures, global fluctuations, and the aftermath of the pandemic, leading to instability. Rising inflation, sluggish growth, and trade disruptions demand urgent attention from all sectors to restore stability and stimulate growth.
With $420,000 in retirement savings, diversifying into assets that historically perform well during inflationary periods, such as Treasury Inflation-Protected Securities (TIPS), commodities, or foreign currency assets, might help protect against potential dollar depreciation. Exploring options like global real estate, diversified foreign bonds, or high-quality international equities may also offer a hedge against a declining dollar and inflationary risks.
Please do the calculations for the split approach. Also consider the Roth IRA limits for the year, maxing out a Roth and putting the rest into the house.
Great video Bob, I do the halfsies method myself and often am uncertain of myself because as my investment portfolio rises towards some of my loan balances, it becomes harder and harder to not just lump sum pay them off.
Yes, please do a 50/50 approach! Would be interesting to see the calculations if the paid off mortgage guy started investing 5 years later rather than in 2009 when stocks were relatively cheap. My guess it will come out relatively similar to the scenario in this video. $20k difference over 30 years is not massive when taking into account the pure luck of how the stock markets/interest rates perform in those 30 years.
You also miss the interest tax write off, though diminishing. And you didn’t go another 15 years of market following the payoff for a grand total. I a believer in the split method and use it in my personal strategy.
Why did you drop the interest payment from the equation? The person who paid the mortgage off also saved tens of thousands of dollars in interest payments an had the option in completely inverting their relationship with interest … they go from paying it on debt to earning it.
At the end of 30 years, the 15-year mortgage guy owns a house and has $257K saved, the 30-year mortgage guy owns a house and has $324K saved. The interest saved is irrelevant. And the "value impact" is even less relevant. Just compare apples to apples. Also, if 15-year mortgage lost his job when he paid off his mortgage he would have ZERO in savings. That's a bad place to be. Equity in the home is hard to access in general, and even harder to access when you're unemployed. The 30-year mortgage guy would have a nest egg that he could use to help pay his monthly mortgage payments. And if the market dropped like it did in 2009, he wouldn't have to sell all of his investments, just enough to cover the mortgage each month, which means he could cover years of payments if necessary without losing his home.
@@YaBoyDC No, I didn’t, because over 90% of tax filers do not get an interest deduction (even though they think they are). More on that here: ua-cam.com/video/aeeZ_iIQG8Y/v-deo.html
A split, IMO would be good if you don't have an emergency fund of at least 6 months to 1 year....On a side note great video, I would have never thought. Dave Ramsey should redirect his audience to your video, instead of "We interviewed 10,000 millionaires.."
Calculating the interest saved makes no sense in this math. In the end, what matters is the value of your assets. NOT what you saved on interest payments.
You lost me when you pulled $83K out of thin air. That's not real money, it doesn't exist as something they can spend. Also investment guy would be in a better place if he lost his job because he has cash reserve unlike the person who made it all illiquid paying it down early. The risk of putting it all in the mortgage is running into financial hardship before it's paid off. Both guys are exposed to risk here.
Fool. You make more investment returns than what you pay in interest. You are losing money to pay off mortgage and your are losing the tax write-off. mortgage interest does compound but so do investment returns. Buy and sell to realize gains. So dang easy to get over 12% annually from investing.
All a choice you have! Although, almost everyone no longer receives tax write-offs for mortgage payment (Tax & Jobs Act of 2017 raise standard deduction so high, that people with and without mortgage get the same write-off).
This is why you need lots of tools in your tool bill. Now it takes a little bit of creativity, but you can have your cake and eat it too. What would be the best idea, is take your mortgage payment and pay off 5% more per month… And reinvest the difference. So for example, say your mortgage is 1000 per month you pay $1050. Then you reinvest the remaining difference of 400 bucks per month in the VSP. By the time you get to 10 years or so, you have 100 shares of spy. You have paid off some of the interest and you can write covered calls on spy to generate income. I know that this is a buying hold, dollar cost average, type of channel. But there are so many creative ways that you can achieve financial freedom. The more advanced you get in the market.
You are either don't understand how math works or you are disingenuous. Your scenario needed to be timed perfectly 2009 inflection ooint) for the math to be close. You want to convince people for peace of mind that's fine but don't lie and bring math into it
Say that to someone who had this experience in 2009. Facts are facts on this front, and we never know what the future brings. That said, I only wish the very best for people, not the worst.
Here's your next video, 203k mortgage balance @3.875 % plus an additional $700 a month towards principal. and 6% into 401k 6% into roth, 4% match 16k ish a year invested. Etc etc
I'll never understand why more people don't simply do both? Let's say you have an extra 1k a month every month. Why not invest $500 per month and pay and extra $500 a month towards principle too? Seems like no downside here. Paying off mortgage early and making money in the stock market at the same time.
Would you take money out of your house to invest in the stock market?
Choosing to invest instead of paying off mortgage is the same thing just in a different order
Because most people don't have money at the end of the month....
Or use the dividends that you make from investments to pay of your mortgage
Excellent point. Not everything has to be a binary choice.
Cameo!
We chose to pay off my house early.A 30 year loan we paid off in 10 years by making an extra principal payment every month. Because our jobs we get laid off. And the peace of mind is the best feeling.
Silly. Principal payoff money sits in the bank and makes you no money. Imagine having loan now and you were investing that $200K or so that is making 12% minimum each year for the past 10 years. You would have have the money to make payments without jobs or just pay it off and have all that extra money you acquired from investing.
@@williamlyons3947not a lot of people are lucky enough to make a 12% return year over year though.
I posted on one of your earlier videos about paying off my mortgage early. I’m happy to report that I will be done the first part of 2025. I’m gonna get it down to a low amount and make one big payment, before February. Thank you for posting videos like this to keep me and others motivated.
Life doesn't go in a straight line for anyone : there is sickness, accidents, heartbreak, job losses, health changes, cars beaking down, increasing taxes, devorce and food prices just to name a few. 30 years of life is a different thing.
Your final calculation is flawed. You can’t add the “interest savings” on to the balance at the end for the scenario that paid the house off early. While they “saved” $83,000 in interest on the loan, they “lost” the capital of the invested account of the investor. Both scenarios paid $851.68 +$350.00 a month for 30 years. They both contributed a grand total of $306,604.80 from their earnings over 30 years to their home loan and investment account. At the end of the 30 years the one that paid their home off faster had a paid off home and an investment account worth $257,664, and the investor had a paid off home and an investment account of $324,111. You could say one had more piece of mind, but from a purely apples 🍏 to apples 🍎 comparison they both had a paid off home in 30 years and the investor had an extra $66,447
You are right. The last calculation of value impact is wrong. It is what they have in thier pockets at the end of 30 years. But until that part he took a great example in a realistic comparision
Yes, please do a 50/50 calculation for us. It’s what I’m currently doing.
If investing guy gets laid off before 2009 he could have used a portion of his investment to pay the monthly mortgage until he found another job. Not putting the whole investment value towards the mortgage balance, just selling enough of the investment to pay the monthly bill temporarily if his emergency fund didn’t cover it.
You could invest in something that pays dividends, then use all the dividends as extra towards your mortgage. You will grow that portfolio, then year after year you're paying off your mortgage more and more aggressively. Then when you no longer have a mortgage you have a big portfolio paying you.
My mortgage is $406 a month, that's p & i, property taxes and home owner's insurance. We've overpaid the principal ever since our first payment was due paying far more towards principal than interest, Knocked years off of the life of the mortgage in 3 1/2 years and did it with an SSDI income. And we bought at 2.875% zero points.
That interest saving money does not exist in the mortgage guy's saving account. It is not right to add that at the end of the 30 years.
Lol yeah trying to add this in is such a blow to this guys credibility!! That amount is solely reflected in the mortgage being paid off faster and cannot possibly be added in at the end!
But that is money that otherwise would have been spent on the interest. So it makes sense to add it
But it will exist in his account, as long as he doesn't quit his job immediately after paying off the mortgage.
Cash 💸 is king
The "both factor is also a fair strategy for something like VOO pairded with SCHD, or a VTI paired with a a SPY. Get the long term value, get the dividend, and maybe toss something to a crypto that could be sold if need be. Get that ROTH action, and capitalize on employer or Robinhood Gold contribution matching. Get the perks that work right for you!
I agree 100% Nothing better than paid off house.
Imagine investing snowball once house is paid off
You still need to pay property tax (which is generally growing every 1-2 years), insurance, HOA, maintenance. You will never be fully free from monthly payments.
The third option, splitting between investment and mortgage, was my option. I spent 18 years, instead of 15 years or lower, to pay off my primary house and was able to invest. I am 52 and comfortably semi-retired.
Yes. I’d like you to see a half and half approach
That saved interest is part of the investment account, so you‘ve counted it twice. Also, my interest rate is far below 5.5%
paying off the mortgage gave me peace of mind in case things don't go well in my job especially during covid when i decided do pay off one of my rentals. Once the first rental was paid off i used the rental income to pay off the second come while i invest and save money from my w2 job in the stock market. I just purchased another home and im planning to do the same on the 3rd rental. This might not be the best strategy but it definitely gives me peace of mind while keeping my debt as low as possible.
do the half approach, these are very informative none the less.
All that matters after the 30 years is the invested amount man. Interest saved is already baked into the time you're able to invest extra after being paid off, that 83k doesn't matter bro.
I'm paying off mine early with $400 extra monthly (less than halvies). It's more about peace of mind. I want to retire in 10 years, and I want to own my home before then and have no debt at all. It will change everything, even if I might lose out on some money if I invest that instead. Happiness is more valuable.
Best answer: It depends. Is there going to be a years-long bear market and high mortgage rates like the 1980's? Or low interest rates and a strong bull market for many years to come? We can't know for sure. We're also assuming the returns of the S&P 500 index alone. What if they invested a big chunk into something that totally tanked? (It's happened to all of us.) I honestly don't know what the correct answer is, but I'd be interested to see how the "halfsies" math came out. I know people personally that invest mainly in CDs and bonds for that "guaranteed money", but pay more % than that return on their mortgage rate. Still many years from paying it off. I can't follow that logic, but whatever floats their boat. I don't tell other people what to do with their money.
Roth IRA, employer match, maybe a bit more into the 401K or some stocks, and then try to pay off mortgage early. I do agree many financial experts just say stocks will outpace the mortgage, and it's not always going to be true, especially at these high rates. I'll take peace of mind of having a paid off mortgage, then trying to mess around with long-term ETFs and hope for the best
I feel like both ways work great. I feel like it really depends on where you want to spend your money. Paying off your mortgage will help ease up your life, but if you could work through it you can have more money at the end. I do the half and half approach. Would love to see the numbers. I invest more than I put extra into my mortgage. I do an extra $100 a month and at the end of the year my mortgage broker gives me 1% back because of the deal I got which is nice.
I have a liquid account, a Roth IRA, and I'm paying quick on my car loan and student loans.
It's made me over $12k this year alone! I'll be debt free AND making a good amount on my investments in 3.5 years. Cross your fingers!
Being a numbers person I love these scenarios! I actually went to biweekly and upped my payments after your last video of these. I completely agree I want peace of mind.
THEN... When you have those dips you can afford to buy more!!
50/50 calculations would be great to see. Thank you. Great video.
Id do (and currently am doing) a debt recycling strategy. Its kind of doing both.
Pay down mortgage while investing and the intetest repayment becomes tax deductible
I’ve been doing the half and half approach. It’s the least stressful of the two options.
All these issues stem from an economy grappling with uncertainties, including housing problems, foreclosures, global fluctuations, and the aftermath of the pandemic, leading to instability. Rising inflation, sluggish growth, and trade disruptions demand urgent attention from all sectors to restore stability and stimulate growth.
With $420,000 in retirement savings, diversifying into assets that historically perform well during inflationary periods, such as Treasury Inflation-Protected Securities (TIPS), commodities, or foreign currency assets, might help protect against potential dollar depreciation. Exploring options like global real estate, diversified foreign bonds, or high-quality international equities may also offer a hedge against a declining dollar and inflationary risks.
Refinance to a 15 year mortgage and investing is the smart play.
No thanks to closing costs a second time
We do both weighted more towards investing/saving. Our mortgage rate is 3.25% up from 1.49% previously. Thanks Sue, 😊
Please do the calculations for the split approach. Also consider the Roth IRA limits for the year, maxing out a Roth and putting the rest into the house.
What if the guy who paid off his house invested 1550 after mortgage is paid off.
Investor was paying Mort 1200 plus 350 investing
Ah - fantastic point! We can run that scenario!
Great video. Thank you.
Great video Bob, I do the halfsies method myself and often am uncertain of myself because as my investment portfolio rises towards some of my loan balances, it becomes harder and harder to not just lump sum pay them off.
Yes, please do a 50/50 approach! Would be interesting to see the calculations if the paid off mortgage guy started investing 5 years later rather than in 2009 when stocks were relatively cheap. My guess it will come out relatively similar to the scenario in this video. $20k difference over 30 years is not massive when taking into account the pure luck of how the stock markets/interest rates perform in those 30 years.
Did you calculate the home interest deduction over the 30 years?
No, because over 90% of tax filers do not get an interest deduction (even though they think they are): ua-cam.com/video/aeeZ_iIQG8Y/v-deo.html
Would be interesting to compare the three styles
Can you do a halvsies approach video please!
I would love to see a video on the half and half approach. It'd be nice to know if it could get you the best of both worlds.
You also miss the interest tax write off, though diminishing. And you didn’t go another 15 years of market following the payoff for a grand total.
I a believer in the split method and use it in my personal strategy.
Why did you drop the interest payment from the equation? The person who paid the mortgage off also saved tens of thousands of dollars in interest payments an had the option in completely inverting their relationship with interest … they go from paying it on debt to earning it.
At the end of 30 years, the 15-year mortgage guy owns a house and has $257K saved, the 30-year mortgage guy owns a house and has $324K saved. The interest saved is irrelevant. And the "value impact" is even less relevant. Just compare apples to apples. Also, if 15-year mortgage lost his job when he paid off his mortgage he would have ZERO in savings. That's a bad place to be. Equity in the home is hard to access in general, and even harder to access when you're unemployed. The 30-year mortgage guy would have a nest egg that he could use to help pay his monthly mortgage payments. And if the market dropped like it did in 2009, he wouldn't have to sell all of his investments, just enough to cover the mortgage each month, which means he could cover years of payments if necessary without losing his home.
Yes, please do the half-seys calculations 😊
can someone link me the video where Bob talked about only buying when fear and don giveafut ?
What about the tax benefit from mortgage interest? Did you factor that in?
@@YaBoyDC No, I didn’t, because over 90% of tax filers do not get an interest deduction (even though they think they are). More on that here: ua-cam.com/video/aeeZ_iIQG8Y/v-deo.html
Doing both makes sense to me
Where did you get the $100 picture on the wall behind you?
I want to see the half split approach comparison
Yes! Do a follow up video please
A split, IMO would be good if you don't have an emergency fund of at least 6 months to 1 year....On a side note great video, I would have never thought. Dave Ramsey should redirect his audience to your video, instead of "We interviewed 10,000 millionaires.."
I’m doing the half/half on loans and investing. Tell me more about this please
Can we do a review on Sofi and Target please
Would love to see the halfsies!
Calculating the interest saved makes no sense in this math. In the end, what matters is the value of your assets. NOT what you saved on interest payments.
Paying off your mortgage early is a sure bet. I am making extra payments towards my mortgage AND investing.
invest, do not pay mortgage if you always have the cash and equity to pay off the house.
I bought my house on the pandemic. Mortgage rate 2.38 % 🎉
Give us the Halvees video please 🙏 🙌🏾👏🏿
It doesn't have to be a 50/50 split, it could be a 60/40 or something like that 🙂
I’m going both.
You lost me when you pulled $83K out of thin air. That's not real money, it doesn't exist as something they can spend. Also investment guy would be in a better place if he lost his job because he has cash reserve unlike the person who made it all illiquid paying it down early. The risk of putting it all in the mortgage is running into financial hardship before it's paid off. Both guys are exposed to risk here.
We paid off our mortgage
Halfsies please! :)
Let’s see the half’s
Please do a 50/50 video
Do it Bob!
Do the video!
You can’t predict the future
Yes halvises
Why buy a house in the first place 😂
Halvsies please
Fool. You make more investment returns than what you pay in interest. You are losing money to pay off mortgage and your are losing the tax write-off. mortgage interest does compound but so do investment returns. Buy and sell to realize gains. So dang easy to get over 12% annually from investing.
All a choice you have! Although, almost everyone no longer receives tax write-offs for mortgage payment (Tax & Jobs Act of 2017 raise standard deduction so high, that people with and without mortgage get the same write-off).
Great video. Another video with half and half and a brief look at different interest rates and how they factors in would be great.
This is why you need lots of tools in your tool bill. Now it takes a little bit of creativity, but you can have your cake and eat it too. What would be the best idea, is take your mortgage payment and pay off 5% more per month… And reinvest the difference. So for example, say your mortgage is 1000 per month you pay $1050. Then you reinvest the remaining difference of 400 bucks per month in the VSP. By the time you get to 10 years or so, you have 100 shares of spy. You have paid off some of the interest and you can write covered calls on spy to generate income.
I know that this is a buying hold, dollar cost average, type of channel. But there are so many creative ways that you can achieve financial freedom. The more advanced you get in the market.
do it please
You are either don't understand how math works or you are disingenuous. Your scenario needed to be timed perfectly 2009 inflection ooint) for the math to be close. You want to convince people for peace of mind that's fine but don't lie and bring math into it
Say that to someone who had this experience in 2009. Facts are facts on this front, and we never know what the future brings. That said, I only wish the very best for people, not the worst.
Crypto is the best future where people makes money and generate good returns....
Yes on the halfsies!!!!!!
You're not factoring in income tax savings by writing off mortgage interest.
Half vid please
Get a HELOC and by BTC - beats everything right now.
Here's your next video, 203k mortgage balance @3.875 % plus an additional $700 a month towards principal. and 6% into 401k 6% into roth, 4% match 16k ish a year invested. Etc etc