I don't know why Mr W brought this up last night, but he asked me what I would suggest we do if we were to suddenly win/find/get $500k.
The choices:
1. Pay off our mortgage ($228k) and debts ($76k), rent out our house, and purchase a second home with a bit more property to move to. This second home would likely cost us around $400k, meaning we would still require some mortgage. However, rental payments would be put towards this mortgage (about $1200/month).
2. Pay off our mortgage and debts, make some changes to the current abode, and continue to live in the house mortgage free. Invest at least $200k, and invest the mortgage & debts payments we were making (~$2600/month). Consider purchasing a rental property, probably a condo, after at least one year with this strategy.
We decided that the second strategy made the most sense to us. Option one, even though one day we would like a little more yard and house space (just a little, we don't need an estate with a mansion), doesn't make sense because we would continue to carry a mortgage, and the house rental might not cover the mortgage payments. I must say though, that my overriding preference for option 2 is that we would be completely DEBT FREE, a freedom I cannot imagine right now, and I would like to have an opportunity to experience this.
Overall it is a great question though because it got us thinking of our financial priorities, and we are on the same page. It is a nice check in to realize that we have matured a little with our finances, finding that being debt free and investing for the future really is a goal for both of us.
1 Comment:
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- SavingDiva said...
March 18, 2008 at 8:49 AMIf I had $500k, I would max out my Roth IRA ($4k) for 2008 (already contributed $1k). Max out my 401(k) $13,500. Buy a new car $30,000. Put $400k into an investment account. The remaining $52,500 would be used as an EF and down payment.
