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I am 52, live pretty well paycheck to paycheck, but have a

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good pension plan. I...
I am 52, live pretty well paycheck to paycheck, but have a good pension plan. I still owe a lot on my mortgage. My parents are planning on giving me and my siblings money to pay off our mortgages. The amount will only pay about half of mine off. After that I am still left with the same mortgage payments, and it will take 9-10 years to finish paying off. I am wondering if it would be better to invest the money and use the earnings from the investment to make annual lump sum prepayments, rather than use all of it to pay down the mortgage. According to the mortgage calculator I used based on a guestimate of how much I would earn on the investment, I would have paid it down to the point where the mortgage would equal the inheritance in about 5 years and then pay it off. What do you think?
Submitted: 1 year ago.Category: Finance
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Answered in 15 minutes by:
3/9/2016
Financial Professional: Stephen G., Sr Financial Expert replied 1 year ago
Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 7,215
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Well, I think it's a simple answer.

I don't know what assumptions you used for investment income, which no matter what you used is subject to some degree of risk.

Paying down your mortgage with the lump sum payment should be the best alternative. It's investing in a guaranteed Certificate of Deposit compounded at the rate that you are paying on your existing mortgage. You will be paying substantially more principal if you continue your payments at the same level (which would normally be required).

The only other alternative I would consider would depend upon your existing mortgage rate & if it is above the current market rate by at least 1/2 of 1%, I would consider refinancing, to get a better rate.

If you give me your investment assumptions & what your investment plans would be as well as what your existing mortgage rate is (hopefully fixed) I may be able to fine tune my comments.

However, it would be unusual to have anything but using the lump sum payment to pay down your mortgage principal being the best alternative.

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Financial Professional: Stephen G., Sr Financial Expert replied 1 year ago

Just checking in. I see you have had a chance to read my response to your question.

Do you have any follow-up questions?

If not, please remember to rate my response as that is the only way we receive credit for our work.

Thanks very much,

Steve G.

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