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Is it better to pay off my mortgage if I inherit enough money to do so?

  • September 12 2012 - US
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Answers (6)

Profile picture for Ofe Polack
There are too many issues concerning your question.  We do not know how old you are, how much is the inheritance, how does that amount of money relates to what you earn, your other financial obligations and the cost of your home.  It would be best if you sat down with a financial advisor to discuss your options.  Congrats on the inheritance and hope that you use it wisely. 
  • September 13 2012
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Profile picture for ShaylaTwit
I think this is a question moreso for both your Accountant and your Financial Planner.  With interest rates so low, you can possibly refinance [unless you've purchased recently with already low rates] and use that money to invest elsewhere with a higher rate of return.  Hope that helps.  -- Shayla Twit, Sarasota Realtor
  • September 13 2012
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Remember that you make money, LOTS of money, by leveraging your money (aka using debt / loans). If you can get a mortgage at 3.25% and put the money you would have used to pay off that mortgage into an investment vehicle that pays 5+%, then you're making money off of borrowed money. This is why corpoations take out loans instead of funding everything themselves (using equity). There are dozens and dozens of safe investments that will not put your money at risk. If you are willing to take more risk, then you increase your possible yearly returns into the 10-20% range.

-William
Golden Land Investments & Financial, Inc.
  • September 12 2012
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Profile picture for TimHoyt5
You have to account for risk. Other investments can earn 9% or they might not... You also have to account for emotions, people with money to invest can make bad decisions with that money. Paying off the house brings peace and certainty, and is a good way to honor the inheritance.
  • September 12 2012
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Although, Raheel - it really costs 4%-5% a year, because of the tax deductions, right?
  • September 12 2012
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You can, but financially it makes little sense to pay off something that costs 4%-5% a year, when the same money can be invested and potentially make you 8%-9%.

It may seem counterintuitive, but paying off a mortgage in a short time (if someone comes into significant money) is not the best idea.

But then again, a lot of people may do it for emotional reasons.

Raheel Shahzad, Attorney, CPA, Real Estate Agent
Chicago, IL
  • September 12 2012
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