The Moneyist: ‘I’m in a very lucky position’: I will receive a $300,000 inheritance. Should I pay off my mortgage or invest the money?

by | Aug 16, 2022 | Stock Market

Dear Quentin, I currently owe $300,000 on my house with a 2.5%, 30-year mortgage. I am maxing out my retirement accounts — IRA and 401(k) — and looking to retire in less than 10 years. I will receive an inheritance of at least $300,000, so I will be able to pay off the house. 

I’m in a very lucky position. Should I pay it off — or should I invest the money?  HomeownerDear Homeowner, You will save a considerable amount of interest by paying off your mortgage early, especially at a 2.5% rate. Millions of homeowners would kill for that rate.  Of course, a lot of it has to do with luck. Let’s take a moment: The 30-year mortgage rate is over 5.5% currently. The consumer price index rose 8.5% in July from a year earlier, and the closely watched “core” measure of inflation — excluding volatile food and energy — was hovering at 5.9%. With a 2.5% interest rate, you are already making money simply by living your life.  As my colleague Aarthi Swaminathan put it: “While the price of their car, gas, electricity, and other expenses go up, that homeowner will also see their home value rise with inflation. Yet their mortgage rate remains the same as it is not inflation adjusted, which means they’re still paying the same rate that they were pre-inflation.” Overpay some if you can, especially early on in t …

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