In today's grim financial times, would it be better to pay off a house completely or invest in mutual funds?

Question

I have a theorectical question. Suppose you owe $50,000 on your mortgage. You also have $50,000 in mutual funds that have been taking a beating with the rest of the stock market. The funds have been averaging under 5% for the past few years because the market just stinks. With the threat of a recession and even a bigger threat of financial institutions going under and investors not being able to get their money, would it be a good decision to take that money out of the stock market completely and pay off the house in it's entirety? The mortgage is a 7% fixed loan. Without accelerated payments, the note would be paid in 8 years.

The net of it would be zero money to lose in the market and 100% debt free.

Another reason for this question is the concern that terrorist may destroy the US financial platform, targeting our foundation, the stock market. Again, if there is no money in the market, then there is no money to loose.

Only financially educated responses please

Answer 1

Well, that all depends on what will happen in the future and no one really knows that do they?

Its not possible to see what the best decision would be here. I can say that the SAFEST thing to do would be to pay off your mortgage. The value of Real Estate always goes up. Therefore, the value of your house will be higher when the market gets good again than it was when the market was good last time.

Also, having a completely paid off property can be very profitable. You can rent it out and make money that way. Figure, you will only have to pay property taxes and utilities most of the time. Everything else is PROFIT.

Again... that is the safest route, but no necessarily the best route. The best route is unknown because the future is unknown.

Hope that helps

Answer 2

pay your debts balance in fixed deposits only if interested to manipulate buy silver or gold in physical form

Answer 3

There are many more factors to this question that what you have listed - how has the local housing market performed (appreciation & foreclosures) in the area, how stable is your income stream, etc.

I would lean toward paying off the mortgage debt.  You are guaranteed to be required to pay the mortgage.  You are not guaranteed to have an appreciation in the value of the stocks (mutual fund).

But you also have to consider the tax implication of both cashing in the stocks (capital gains tax) and losing the home mortgage deduction.

Why not talk to a financial planner?

Good Luck

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Answer 4

I'm in a similar situation and have been asking the same question to folks.  The same answer I have been getting repeatedly is to pay off your mortgage instead of investing the money in the market.  There are 2 reasons for this.  First of all, the 'traditional' return in real estate will more than likely beat the return from the stock market in the next few years, especially if we do get stuck in a prolonged recession or stagnant market (look at stock performance from 1965-1980ish).  Second, by paying off extra principal, you are essentially paying yourself...and reducing your interest payments to the banks...so it's a twofold win.   Now, I wouldn't recommend taking money out of your mutual funds, since they are at their lows right now, just divert your 'new' money to the house payments.  Good luck!

Answer 5

I'd say pay off your house.  Then put your money into savings and in the late part of 09, put them back into mutual funds.

Answer 6

You might want to take your money out of the stock market and put it into CDs or savings accounts.

I would not use it to pay off the mortgage because Millionaires don't do that either.

Answer 7

It depends on which Mutual Fund your investments are loaded. If the Fund has a strong base to take care of the present declining financial trends and recessions than ignore the necessity to encash and repay.

No terrorist are capable to destroy the US financial Platform.

No terrorist can dictate to the world and succeed.

Why this fear?? Why think of terrorist ??  When you do so you give indirect importance to such organisations. Just ignore such outfits and accept what has to come along.

By mentioning the word terrorists, it encourages them to be more blunt and fearless. They lack courage and humane values. They are full of hate and non compassionate..Never discuss in groups about terrorists as it lends psychological fear amongst the week and infirm and the discussions spreads to a unhealthy situation.

Theoretically, if you are in such a situation just hold on to your investments subject to choice of investments made in Mutual Funds are of credentials as referred in the para one herein above.