Should I pay off my house?

[matt]

Hi all,

Thx for taking the time to help me ponder this question. I purchased a house in La costa oaks for 900K in early 2010. I put 400K down and borrowed 500K at 4.75% fixed for 30 years (mortgage is 2600/month, property taxes and HOA about another 1000/month).

Shortly after buying the house I was presented with a pretty great overseas opportunity. I took a bit of a risk and left a comfortable job with a view that if things work out I would be able to pay off my mortgage in about 3 years. I have not rented the house yet but believe I can come close to cash flow neutral as I’m told the rental value is about $4K.

Fortunately for me, its now looking possible that I can accumulate sufficient cash pay off the house. Its a life dream for me to own my own home and would certainly give me a great sense of security. My question is should I? Am i better off renting the home long term and having a tenant pay the mortgage? Are there any tax advantages to maintaining the mortgage and renting? Am I better off investing the cash, possibly in more real estate? Is it foolish to pay off the house if inflation sets in and the $ devalues?

I’m not a financial whiz but have seen some great discussions on similar topics on this site over the years and would appreciate your thoughts.

[sdsurfer]

I would think that if I have the opportunity to pay off my own mortgage or let someone else do it for me… I am a nice guy, but would prefer to let them pay it off.

It does sound like security is important to you so make sure you factor in some vacancy and your management costs. I really think that rents are going to go up with all the people that have had their credit destroyed lately, but I could always be wrong of course.

Yes. There are tax benefits, but I’m not a CPA so ask them about that.

Make it a great day!

[sdsurfer]

I would think that if I have the opportunity to pay off my own mortgage or let someone else do it for me… I am a nice guy, but would prefer to let them pay it off.

It does sound like security is important to you so make sure you factor in some vacancy and your management costs. I really think that rents are going to go up with all the people that have had their credit destroyed lately, but I could always be wrong of course.

Yes. There are tax benefits, but I’m not a CPA so ask them about that.

Make it a great day!

[sdsurfer]

I would think that if I have the opportunity to pay off my own mortgage or let someone else do it for me… I am a nice guy, but would prefer to let them pay it off.

It does sound like security is important to you so make sure you factor in some vacancy and your management costs. I really think that rents are going to go up with all the people that have had their credit destroyed lately, but I could always be wrong of course.

Yes. There are tax benefits, but I’m not a CPA so ask them about that.

Make it a great day!

[sdsurfer]

I would think that if I have the opportunity to pay off my own mortgage or let someone else do it for me… I am a nice guy, but would prefer to let them pay it off.

It does sound like security is important to you so make sure you factor in some vacancy and your management costs. I really think that rents are going to go up with all the people that have had their credit destroyed lately, but I could always be wrong of course.

Yes. There are tax benefits, but I’m not a CPA so ask them about that.

Make it a great day!

[sdsurfer]

I would think that if I have the opportunity to pay off my own mortgage or let someone else do it for me… I am a nice guy, but would prefer to let them pay it off.

It does sound like security is important to you so make sure you factor in some vacancy and your management costs. I really think that rents are going to go up with all the people that have had their credit destroyed lately, but I could always be wrong of course.

Yes. There are tax benefits, but I’m not a CPA so ask them about that.

Make it a great day!

[sdrealtor]

If it was me, I would keep the mortgage and rent it out while I was gone. You could always pay it off at a later date but with that kind of interest rate its better off to have the flexibility. I might consider, refinancing into a 15 yr loan too as you can get owner occupied rates which should be in the low to mid 3’s now or even a 5/1 or 10/1 ARM on a 30 yr to take advantage of lower rates.

BTW, I live in the sister community to yours and have for 12 years. While not a popular belief around here I think LC Oaks is a bit under valued relative to the rest of the market around here. Not that I would expect great returns in the short run but I think LC Oaks will do better than average for this area over the next 10 to 20 years.

[sdrealtor]

If it was me, I would keep the mortgage and rent it out while I was gone. You could always pay it off at a later date but with that kind of interest rate its better off to have the flexibility. I might consider, refinancing into a 15 yr loan too as you can get owner occupied rates which should be in the low to mid 3’s now or even a 5/1 or 10/1 ARM on a 30 yr to take advantage of lower rates.

BTW, I live in the sister community to yours and have for 12 years. While not a popular belief around here I think LC Oaks is a bit under valued relative to the rest of the market around here. Not that I would expect great returns in the short run but I think LC Oaks will do better than average for this area over the next 10 to 20 years.

[sdrealtor]

If it was me, I would keep the mortgage and rent it out while I was gone. You could always pay it off at a later date but with that kind of interest rate its better off to have the flexibility. I might consider, refinancing into a 15 yr loan too as you can get owner occupied rates which should be in the low to mid 3’s now or even a 5/1 or 10/1 ARM on a 30 yr to take advantage of lower rates.

BTW, I live in the sister community to yours and have for 12 years. While not a popular belief around here I think LC Oaks is a bit under valued relative to the rest of the market around here. Not that I would expect great returns in the short run but I think LC Oaks will do better than average for this area over the next 10 to 20 years.

[sdrealtor]

If it was me, I would keep the mortgage and rent it out while I was gone. You could always pay it off at a later date but with that kind of interest rate its better off to have the flexibility. I might consider, refinancing into a 15 yr loan too as you can get owner occupied rates which should be in the low to mid 3’s now or even a 5/1 or 10/1 ARM on a 30 yr to take advantage of lower rates.

BTW, I live in the sister community to yours and have for 12 years. While not a popular belief around here I think LC Oaks is a bit under valued relative to the rest of the market around here. Not that I would expect great returns in the short run but I think LC Oaks will do better than average for this area over the next 10 to 20 years.

[sdrealtor]

If it was me, I would keep the mortgage and rent it out while I was gone. You could always pay it off at a later date but with that kind of interest rate its better off to have the flexibility. I might consider, refinancing into a 15 yr loan too as you can get owner occupied rates which should be in the low to mid 3’s now or even a 5/1 or 10/1 ARM on a 30 yr to take advantage of lower rates.

BTW, I live in the sister community to yours and have for 12 years. While not a popular belief around here I think LC Oaks is a bit under valued relative to the rest of the market around here. Not that I would expect great returns in the short run but I think LC Oaks will do better than average for this area over the next 10 to 20 years.

[SD Realtor]

I would agree bigtime. With the govt practically giving money away it is foolish to dump capital into an asset that will at best appreciate very slowly and at worst depreciate. At some point in the future when rates are soaring people who have capital will be able to take advantage of fantastic opportunities. This will not be in the near future but it will happen. In the early 80’s the interest rates on long term bonds were double digit. So imagine paying 5% on your mortgage and making 10% on the investment rather then paying off your home.

[SD Realtor]

I would agree bigtime. With the govt practically giving money away it is foolish to dump capital into an asset that will at best appreciate very slowly and at worst depreciate. At some point in the future when rates are soaring people who have capital will be able to take advantage of fantastic opportunities. This will not be in the near future but it will happen. In the early 80’s the interest rates on long term bonds were double digit. So imagine paying 5% on your mortgage and making 10% on the investment rather then paying off your home.

[SD Realtor]

I would agree bigtime. With the govt practically giving money away it is foolish to dump capital into an asset that will at best appreciate very slowly and at worst depreciate. At some point in the future when rates are soaring people who have capital will be able to take advantage of fantastic opportunities. This will not be in the near future but it will happen. In the early 80’s the interest rates on long term bonds were double digit. So imagine paying 5% on your mortgage and making 10% on the investment rather then paying off your home.

[SD Realtor]

I would agree bigtime. With the govt practically giving money away it is foolish to dump capital into an asset that will at best appreciate very slowly and at worst depreciate. At some point in the future when rates are soaring people who have capital will be able to take advantage of fantastic opportunities. This will not be in the near future but it will happen. In the early 80’s the interest rates on long term bonds were double digit. So imagine paying 5% on your mortgage and making 10% on the investment rather then paying off your home.

[Author]

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