Should I Pay Off the Mortgage?
by
Gregory Grant
Because of the aging of the parents of the baby-boom generation, soon a large transfer of wealth will occur that will show up as inheritances. What should the boomers use that money for? But dreams aside, should this money be used to pay off what is the largest investment for many: their house. Probably not.
"In general, a person who inherits money really should think about not paying off the mortgage since they are receiving a tax deduction for the payments on the interest," says Marlene Cintron of Merrill Lynch. "They should consider purchasing some alternative investments that can also continue to appreciate as their home currently is."
With mortgage rates at about 7% -- and the stock market returning on average 10% -- financial planners are advising clients to continue carrying their mortgages, leaving more money available to invest in the stock market.
"The housing market is very, very good right now, but at any point in time it can collapse," says Cintron. "It makes sense for you to have something where you're building equity but also to have something outside of that home and have it invested in equities and stocks and bonds that you really are hedging both markets at both times."
Owning a home mortgage-free is a comforting thought to many, but with the investment potential of the stock market, it may make more sense to keep the mortgage and invest that money instead.
In recent years, companies have flocked to the web to set up dot.com sites. Initially retail companies caught the attention of investors and consumers alike.
When to sell a stock is as important as when to buy a stock. The investor that goes beyond just looking at the financial pages will find that this kind of in-depth research will pay off in helping to make wiser investment choices.