I just received $140,000. I owe $100,000 on my house. Do I pay it off, invest in CD’s, buy t bills etc. ?

Question by moneyman: I just received 0,000. I owe 0,000 on my house. Do I pay it off, invest in CD’s, buy t bills etc. ?
I would like to buy a year-old RAV 4 within a year. I am 47 with 13 and 10 year old
I already started 529 Learning Quest savings for my two children. It sounds like everyone thinks I should invest in mutual funds instead?

Best answer:

Answer by crimson1766
Ok first pay off the house. Then with the rest of the money you should buy one thing for each of your kids and then spend the rest on anything else you want/need.

What do you think? Answer below!

12 Comments/Reviews

  • Covener says:

    Think it over before you do anything with the money. I would buy 100,00 in cd as follow: (6) 10,000 (6) 5,000 (10) 1,000. The rest I would put in a High Yield Money market. I would also you call your mortgage co amd request an amortization so you’ll know exactly how much you’re paying if you decide to pay it down instead of paying it off. If you have a 30 yr mortgage, you pay about 70% on the the 15 years.

  • Shana B says:

    Put the $ 140k in a federally insured investment that won’t lose money like a CD, and spend the interest you receive to pay your mortgage, instead of using up the principal.

    As for the kids, don’t put any money in their name or they’ll have a harder time getting financial aid for college.

  • Supra1Q says:

    Do not pay off your mortgage, it’ll likely be the cheapest loan you could ever get. Remember, if you pay down (a loan) of a 6% mortgage, where interest deduction off of your taxes makes it even less, that’s equivalent to the return you are earning on that money. The S&P500 over any 10 contiguous years has averaged ~12%/yr, and several mutual funds outperform that, so right there you are forgoing ~8% return.

    If I were you, unless you know of a financial planner you can trust, contact jonathanpond.com who for a couple hundred $ fee, has you fill out a detailed questionaire–called Smart Planner–of your financial life and then sends you back a detailed step-by-step set of actions you need to take to make sure ALL of your financial bases are well covered. I thought I was good and this identified some weak spots I didn’t know I had. It’s always comforting to get a good check/balance, especially from a well respected, unbaised group you can trust. Suze Orman is another great personal finance coach whose website/books are worth looking into.

  • nittygritty says:

    your 47..its time to have your house paid off…so pay off the house invest 20,000 and the other 20,000 you can spend if you wish…

  • moonman says:

    It depends on what your interest rate is on your home, as well as how valuable the piece of mind that knowing your house is paid off is to you. Also, it depends on your tax bracket, since your mortgage interest it typically tax deductible. If you the interest rate after the tax deduction is still higher than what you will get investing, then it would be economical to pay off the mortgage. Otherwise, the choice is up to you.

    I personally might pay down the mortgage a bit, but invest the rest. I would spend some, but I would definitely leave enough to cover the mortgage.

    Another plus to investing is that you will have that money in savings, and you will still be paying the full amount towards your mortgage. If you pay the mortgage off with this, there is no guarantee that you will keep on putting that money into savings every month.

  • Con4Life says:

    I would say…

    Pay the House- No more mortgage.
    Pay all loans and credit cards that are revolving.
    Buy your car with a loan- Yes get a loan.

    Buying a car with a loan is better than paying it cash…a car loan is usually between 36 to 60 months only. You put the cash in a CD and make extra income with interests earned. With that monthly income, you can pay your monthly car payment or at least half of it. At the end, you basically pay off your car for free or for half of it free.

    Credit cards stick with you for a long time cause they are revolving, so that is why you want to pay them off first. And ofcourse, paying off your house eliminates your monthly mortgage payment which is probably your biggest expense.

    Stick the rest of the money in a CD and get that extra income.

    Good luck…

  • Dr. Deth says:

    refinance your house to the point where you can reduce your monthly payment by $ 200, 300 or whatever will make you more comfortable per month, put 20k into mutual funds for each kids college expenses, 6 months expenses in an emergency fund, pay off car loans and credit cards, do some repairs/upgrades on house ($ 10k), max out your 401k plan in the next year (15k) or max out IRA if you don’t have a 401k (4000, if you’re married – 4000 for her too) and put enough aside (8000-15000) to replace the money you’re contributing to your 401k, then enjoy the rest – don’t forget a really fun vacation next year

  • heyteach says:

    A lot of “financial experts” would tell you to invest the money or say if your mortgage rate is low, keep it for tax deduction purposes and earn more interest on the money.

    However, I don’t think that is as good as your idea of paying off your house. Why? You can’t lose doing that. With “investing” the money, unless you put it in an insured CD or such, you can lose the money and real inflation probably will exceed the interest earned.

    What makes more sense to me is:
    pay off the house
    make any fixes to it that it needs (be a good excuse for a home inspection–how’s that roof? plumbing? electrical? etc. now repairs would not break you)
    buy the RAV
    make sure you are well-insured–your homeowners, auto, health, disability insurance, life insurance (you have children)

    Then whatever you have been spending per month on the mortgage–invest. Always do an IRA, be it Roth or traditional. If you’ve got a 401(k) or something similar at work, contribute the max that your employer will match. After that, invest in something else. What are you comfortable with? Real estate? Stocks? Commodities? A business venture?

    Be wary of folks telling you to put money in your children’s name for college ed. First, they may not want to go to college, and that could be an issue. Second, when you’re responsible like that, esp. with rate of escalation of costs, it will effectively be held against you for financial aid. It would be smart to be able to help your children with college, or starting a business, when they hit 18, but not required actually. You can do that with your own savings in any case.

    Remember to have a good reserve fund on hand in case of crisis–loss of job, major med expenses, massive house repairs, etc. Can afford to put a few thousand in a good-paying account like Emgrant Direct or ING offer for those “just in case” problems where you need money quick. What you invest you should be able to lose–at least a chunk of it–because we have no guarantees in life.

    Congrats on the money and good luck!

  • shama m says:

    DO SOMETHING GOOD WITH IT! Remember that phrase as your tempted to spend it on little things. Here are my suggestions:
    1- Definitely pay off the house- 100%
    2- Buy a used Rav-4 and pay cash for it. Visit http://www.cars.com for used cars in your area. Don’t spend more than $ 15,000
    3-Put $ 5,000 away in your 13 year olds name into a money market account or high interest earning CD
    4- Put $ 5000 away in your 10 year olds name into a money market account or CD
    5- Put $ 10000 away for yourself in a savings / money market account/CD
    6-Pay off one bill if you can, if not – spend the rest on big gifts for yourself and your children.

    P.S. Don’t do what NewJersey said – don’t invest the majority of it! What you will save every month by not having to make mortgage payments you can invest, but get that house out from under you ASAP! That’s the quickest way to wealth- that you can COUNT on (you can’t count on investments!)

  • h_widick says:

    definitely pay off the house. It is you’re biggest asset. tuck away a little and have fun with the rest. If you need money in the future owning you’re home will allow you to get funding. It’s the american dream to have a home paid for free ad clear. It will take allot of weight off you’re shoulders. Besides, after paying it off everything you bring home will be cusion. congrats

  • newjerseyguy says:

    Put it in the bank until you’ve thought it through. Don’t make any impulsive decisions.
    If you’re really going to buy a car soon, I would pay cash for that. Pay off any consumer debt like credit cards. Invest the rest. You can make more by investing that you will be paying off the mortgage early.

  • Lex says:

    You should pay off the house. It’s real property that you then own and thus have the value of at your disposal. I’d then put aside a small amount for each child and invest the rest.

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