Subject: Re: ot: advice for my nephew
"Mungofitch and others.
My nephew is 38 years old,
He has a mortgage on his house at 4% rate.
He also has money is a bank with more than mortgage accoumt getting around 4%.
He wants to know if he should pay off the house and also where to invest any cash he has.

any comments greatly appreciated"

There are many factors to consider. Does he get to use the interest deduction to save on his taxes, or is he just taking the standard deduction? Is he knowledgeable enough to invest that money and earn a decent return? Is the house owned just by him, or is it owned with another person (perhaps a spouse) where he might lose a percentage of the house if there is a breakup? Does he have other income streams which he could afford to pay off the mortgage if his investment goes south? Does he absolutely need to make a decision immediately? Is he the type that would find other uses for the money (buy a boat or a new truck) if he doesn't pay off the house or invest the money right away? Lots of stuff to consider.

Ultimately though the only factor that really matters is one that only he can answer. What would help him sleep best at night?

Some people sleep best knowing their house is completely paid off and they don't have debt hanging over their heads. Others like me, like the optionality of having a chunk of cash sitting around. I am disciplined enough to be willing to let the cash sit there until I find a good use for it.

Personally, a mortgage is an uncallable loan and he is getting a great rate on it so I would prefer having the cash in the bank to give me more options to use it in the future. However, as mentioned I am disciplined enough not to "waste" it on new toys. I also feel I am knowledgeable enough about investments that I believe I could find investments that could give me a better return than the low interest rate I am being charged on the loan. Furthermore, I have other sources of income that I could use to pay of the mortgage if I screwed up my investment and lost it. That is me though.

My sister and her husband recently inherited a large chuck of cash and they immediately used it to pay off their cheap mortgage. They both sleep better at night knowing they own their house outright and are not on the hook for debt payments for the next 20 some years.

What would help your nephew sleep best at night?