Large cash - payoff house vs invest

[WorkforFIRE]

Hi All - curious to hear everyone’s thought on this.

I have large cash on hand ( >400k). Trying to figure out where to put this.
investing - on track to hit my goal of 300k invested in 2021 in mostly S&p 500.
EF - I’ll keep 150k for ~18 month EF, yes, I know that’s long but I like to be extra conservative.
home - ~500k left at 2.8%.

so the remaining 200-300k… thoughts on investing more vs paying off house? I hate debt. Home is only debt I have. But rate is low.
i know this is likely personal choice, but would love to hear rational from this forum.

[CordMcNally]

I would invest it if my investment horizon was 7 to 8 years or longer. Like you said, it's personal. It's also not a 100% and 0% decision. You can invest some and use some to pay down the mortgage debt.

[Zaphod]

Invest. Stop viewing the mortgage as a debt. If it is worth more than the mortgage you're net positive.

[Random1]

Personally, if you have a lot of other assets , I would pay off the mortgage, sounds like you a good saver already. You would have to earn at least 5% no risk money to beat it. I dont think you can get that anywhere now. You may get a better return , but that would imply higher risk premium.

[StarTrekDoc]

Depends on your Risk tolerance. Why did it blossom to 400k? do you really need 150k EF at your current situation and what constitutes as 'EF" in the first place? 150k in cash in local bank? That decision maybe more worthwhile discussion than a Taxable SP500 v Bond v Mortgage payoff discussion for this one-off investment.

Personally given what got you here -- you'll probably sleep better with paydown of mortgage.

edit:
My amateur financial advisor advise knowing your conservative skew at 30k feet:
1. Paydown mortgage
2. Move EF to amounts to float 2-3m with safety taxable bucket (TE bonds if CA/NY) to draw upon for 1-2 years.
3. HELOC for comfort needs and close in large sum draws for EF -helps float any real big draws not anticipate.

[auggie1983]

Don't understand the aversion to fixed rate 2.8% mortgage debt. At some point that will actually lessen the likelihood of retiring safely. We invest in market index funds instead of going 100% bonds or cash right?

[MPMD]

sub 3% mortgage, i'd invest it.

i def wouldn't have a $150k e fund unless you had very unique circumstances

[Zaphod]

Don't understand the aversion to fixed rate 2.8% mortgage debt. At some point that will actually lessen the likelihood of retiring safely. We invest in market index funds instead of going 100% bonds or cash right?

Bingo.

Its actually a risk long term, but a risk that doesnt feel like it and in personal finance circles is taken as gospel. Its not and it literally doesnt make either sense or dollars.

[childay]

I would invest it. Put $100k in yesterday. Still have the mortgage

[WorkforFIRE]

Thanks for the input. Sounds like a mix between invest and pay off mortgage.

it was higher than 400k, but we bought a house. Now we are just sitting on this.

we have large EF fund for no particular reason except to have extra cash on hand for any horrible situation and we need liquid cash. Our annual expenses for 2020 were 75k and 2021 is probably closer to 100k Bc of new house and expenses with that.

Appreciate your 2 cents. I feel like I know the right financial decision but the thought of debt just eats at me…

[wawot1]

Thanks for the input. Sounds like a mix between invest and pay off mortgage.

it was higher than 400k, but we bought a house. Now we are just sitting on this.

we have large EF fund for no particular reason except to have extra cash on hand for any horrible situation and we need liquid cash. Our annual expenses for 2020 were 75k and 2021 is probably closer to 100k Bc of new house and expenses with that.

Appreciate your 2 cents. I feel like I know the right financial decision but the thought of debt just eats at me…

If the thought of debt just "eats at you", then there's your answer. Knock out the mortgage. Sounds like whatever you decide isn't going to be a bad decision.... the habits you have that allowed you to acquire $400k are still there, right? Do what will help you sleep at night.

[danesgod]

I know how the math works out, but I'd pay off the house. My wife on the other hand would carry the mortgage.

My friends recently sold their Bay Area house to move to MN and paid cash for their new house in MN. They don't regret a thing.

[zlandar]

I like being mortgage debt free. When I prepaid my mortgage I also increased my equity-to-bond ratio so I didn't go too conservative.

[Nysoz]

Historically and mathematically investing wins out over time.

Sounds like personally and emotionally you hate debt and paying it off would make you feel better.

Up to you to decide what you want to do. There’s also always the middle ground and just do half and half.

But definitely don’t let it all sit as cash.

[Huggy]

I'm seriously curious of the rationale behind sitting on such a large sum of cash (400k+) without putting it to use.