Pay off the mortgage or invest

[itsZack]

I've been thinking about whether it's better to pay off my mortgage before I retire or keep the monthly payments and invest a lump sum of money instead.

It feels like there is no easy answer.

I have $230K and my mortgage payment is just under $2K a month for the next 12 years. If I pay off the house, I'd need less money to live on each month and I'd have the peace of mind of one less bill. My money would be in the house but I could always get a new mortgage or sell it if I needed cash. But the downside is I'd have less cash on hand to work with and my loan is fixed at a 4.5% interest rate, which is pretty good right now. What do you all think are the biggest pros and cons I should be considering before I make a decision?

 

[FrugalLyf]

A 4.5% mortgage is a decent deal, and historically speaking, investing that $230K in the market could earn you more than you'd save by paying off the loan, potentially building a larger portfolio for your future.
But like any investment, there's always the risk.
There's no guarantee the market will perform well, and you'd need to make those monthly payments no matter what.
But on the other hand, paying off the mortgage gives you a huge win which is that peace of mind.
Eliminating that $2K monthly bill drastically lowers your living expenses, meaning you'll need to pull less from your investments each year.
The major con is that your money would be tied up in the house and not easily accessible if you needed cash.
So it really boils down to which you value more between maximizing potential returns or securing your peace of mind!

 

[Maryb3th]

4.5% is definitely not in a bad place, so the decision really comes down to peace of mind or liquidity. Paying it off guarantees a return equal to your interest rate and frees up cash flow, but tying up that much money in the house limits your flexibility big time. If you're comfortable investing and can get better returns, keeping the mortgage might make more sense