| Pay off mortgage or invest? |
|
|
|
|
|
patticaryl
Member
Cash: $ 2.10
Posts: 10
Joined: 18 May 2005
|
| Pay off mortgage or invest? |
 |
|
Hi......new to this board and alot to learn. I have the opportunity for paying off my mortgage, credit cards and vehicles and becoming debt free. But I am wondering what is the best way to go. Should I just pay off the credit cards and vehicles and use the rest of the money to invest? My mortgage is 190,000. I could use that money for down payments on real estate rentals or pay off my house and save my 1300 monthly payments. Thanks for any help you can give!
|
Wed May 18, 2005 12:11 pm |
|
|
KathMorgan
Member
Cash: $ 3.84
Posts: 19
Joined: 26 Apr 2005
|
|
|
|
Priorities: Normally I would reverse but since you have funds available to do it all at one time, which is an unusual "problem" to have.......... 
1) Set aside your emergency fund (6 months approx living expenses) in a secure, extremely liquid instrument.
2) Pay off anything that has a higher interest rate then you could expect to make in short term investments. It makes no sense to invest money and get 3-5% return while paying 9-18% interest on debt or more. This includes your house if the mortgage is higher then the return on investments. The tax deduction is nice but makes no sense to spend $10K in interest to get a $3.3K tax cut (assuming you are in the 33% bracket).
3) Once you are debt free  Then start investing as much as you can into the best allocation for your age/risk tolarence/specific situation.
Oh, btw, I'm not sure where this windfall of yours has come from, but before you spend it all on these very worthy goals, make sure that it is not going to be taxable income to you and if it is "get ye to a tax advisor" before spening anything to make sure you have that end covered immediately.
Kathy Morgan EA
H & R Block Master Tax Advisor
Proud Mom of Sgt RT Morgan
1/156 AR BN Louisiana Army National Guard
Shreveport, La currently serving in Baghdad, Iraq
|
|
Wed May 18, 2005 3:46 pm |
|
|
xboxundone
Senior Member
Cash: $ 67.83
Posts: 796
Joined: 19 Sep 2004
|
Why wouldn't you want to be debt free.  Of course pay off anything but your mortgage.... As far as paying off your mortgage.. What rate is you mortgage at. If you can't earn more than you interest pay it off. Realize if you own your home you own it. but if you invest it and heaven forbid you loose a large chunk you still have your house note.....
Just my 2 cents....
|
|
Wed May 18, 2005 3:47 pm |
|
|
financechoices
Senior Member
Cash: $ 53.79
Posts: 253
Joined: 04 May 2005
|
Personally I'd choose to pay off your debts before looking to invest as investing is always a risk.
UK Finance Forum | Loans | Credit Cards
|
|
Thu May 19, 2005 12:26 pm |
|
|
dchapman
New Member
Cash: $ 0.05
Posts: 5
Joined: 21 May 2005
|
Invest if you know how to invest properly.
|
|
Sat May 21, 2005 12:33 am |
|
|
mattice
Member
Cash: $ 3.80
Posts: 20
Joined: 22 May 2005
|
I think it all comes down to what kind of investment you want to make.
If you want a higher risk high return investment you should use the money you already have, because if you lose you won't be in even more debt.
If your going for a low risk investment then I suggest you pay off your debt first. This would help your credit out and you could take out a loan or mortgage to pay for it since you aren't risking that much of the money you don't have.
All assuming your outstanding interest rate isn't that high.
|
|
Mon May 23, 2005 1:25 am |
|
|
ashraf
Preferred Member
Cash: $ 27.69
Posts: 141
Joined: 24 May 2005
Location: The Middle East
|
I would pay off any debt then invest.
You can not become free by accepting to be occupied
|
|
Sun May 29, 2005 2:02 pm |
|
|
KathMorgan
Member
Cash: $ 3.84
Posts: 19
Joined: 26 Apr 2005
|
OK Patti,
Interested in what you are deciding to do? Lots of good advice here, so fess up............
Kathy Morgan EA
H & R Block Master Tax Advisor
Proud Mom of Sgt RT Morgan
1/156 AR BN Louisiana Army National Guard
Shreveport, La currently serving in Baghdad, Iraq
|
|
Tue May 31, 2005 12:22 pm |
|
|
patticaryl
Member
Cash: $ 2.10
Posts: 10
Joined: 18 May 2005
|
Thanks so much for all of your responses. Sorry I didn't get back sooner.
Now, to tell more of the story. I hope to get a settlement for a pending lawsuit. I don't know the specific amount yet. What I really need to find out first is, will it be taxable? The attorneys seem to be unsure what would be the best route to take. This is somewhat of a "personal injury" but of an emotional hardship and not physical.
I have a list in my head of priority spending. First, credit cards, then car loans. After that, we'll see how much there is left. I think there should be enough to pay those off but how much is available after that, who knows? But, thinking that I could pay my mortgage down to owe less than 80% value to lose the PMI and refinance since my credit should be outstanding with no other debt. Currently, my mortgage rate is 7%.
I am trying to find out how the settlement agreement should be written to make it tax-free. Is there a way? Thanks
|
|
Sun Jun 19, 2005 1:24 pm |
|
|
David Briggs
Senior Member
Cash: $ 57.86
Posts: 289
Joined: 16 Jan 2005
|
This should not be treated as income. The award is recovery of something wrongfully taken from you (health, wellness, functionality). Any settlement agreement is going to say that the award is being made in exchange for your giving up further pursuit of damages. Just make sure it also says "and in compensation of any loss, damage or injury suffered" or words to that effect, to make clear that it is intended to give you back in the form of dollars whatever was taken away.
http://www.irs.gov/newsroom/article/0,,id=107817,00.html
~~David
|
|
Sun Jun 19, 2005 4:22 pm |
|
|
patticaryl
Member
Cash: $ 2.10
Posts: 10
Joined: 18 May 2005
|
Thanks David for your reply. On the IRS site it only lists personal physical injury as tax-free. This claim is related to emotional damage from a situation that estranged my relationship with my daughter. It was a criminal act from an employee of the company we are sueing. The claim is also about the turmoil we endured through the last few years. Does this make any sense? We are hoping for a settlement soon, yet don't know how to phrase the agreement so that it will not be taxed. Thanks
|
|
Sun Jun 19, 2005 4:57 pm |
|
|
David Briggs
Senior Member
Cash: $ 57.86
Posts: 289
Joined: 16 Jan 2005
|
OK, thanks for clarifying. The IRS takes a different attitude toward compensatory damages for emotional injuries only.
http://www.irs.gov/businesses/page/0,,id=7050,00.html
~~David
|
|
Sun Jun 19, 2005 5:43 pm |
|
|
patticaryl
Member
Cash: $ 2.10
Posts: 10
Joined: 18 May 2005
|
Thanks David, for trying to help. The cpmplaint is for intentiona infliction of emotional distress, loss of consortium, fraud in the inducement, and unfair trade practices. Doesn't look like there is any way they won't want my taxes on it with the website you sent me.  Won't be much of a settlement when you tie in attorney fees.
|
|
Mon Jun 20, 2005 3:28 pm |
|
|
xboxundone
Senior Member
Cash: $ 67.83
Posts: 796
Joined: 19 Sep 2004
|
quote:
Originally posted by patticaryl
Thanks David, for trying to help. The cpmplaint is for intentiona infliction of emotional distress, loss of consortium, fraud in the inducement, and unfair trade practices. Doesn't look like there is any way they won't want my taxes on it with the website you sent me. Won't be much of a settlement when you tie in attorney fees.
Yes I woudl say Uncle sam will get his take..... which is most likely 1/3...
|
|
Mon Jun 20, 2005 4:15 pm |
|
|
|
