I've come into a large amount of money. Should I invest it or pay off my mortgage?
There are about 20 questions I would want to ask you before answering this question because based on what I know the answer is "It depends!" In general, my experience tells me it is good to have a mortgage on a home when the interest rate is 5% or less. If buying, keep the loan at about 40% to 75% of the value. This way you start out with at least 25% equity and you borrow at least 40%. Having a mortgage has never been a concern for my clients who have investable assets and who know how to manage their budget to not spend more than they make. Even a conservative investment plan should net you at least 5% on an annualized basis over 20 to 30 years so the worst case is you break even on mortgage interest versus investment income. Also, this does not take into account a potential tax deduction advantage from mortgage interest. You also get to pay for a real (and appreciating) asset 10 to 25 years out in the future using todays' dollars. Think about that. It's more meaningful than you realize. The fact of investing is that money makes money and it can help you make payments and deal with emergencies and opportunities. Owning a home outright does none of that.