Such a dilemma. I thought I made my point before – you should not pay off mortgage early under current circumstances. But here is the email I received last Sunday, and with the sender encouragement, I am sharing it.

Hi, I am a 37 year old single mother. Here is my question right of the bat – should I pay off my mortgage early or invest? I thought of asking Suze Orman, but I feel I know her answer already. So I am going to ask you. Just happened to like few posts here. Here is my situation: Got divorced 2 years ago. Settlement left me with a huge chunk of cash, two cars and few other toys. Ex kept his mansion, arts and what have you. Shortly after, I bought a house, on which I currently owe close to $380,000. My rate is even 5.00% for a 30 year fixed mortgage. I did invest some $180,000 into stocks 14 months ago, including my 401(K) and a separate IRA. The funny thing, it is almost all there today, so lucky compare with what could have been. I am leery of the stock market since I am too busy with my dental practice to manage my investments actively and too afraid of all financial advisers. Everyone around me including my patients is saying that the market is going up and I need to invest or I will miss the boat. My parents and few others tell me to pay off my mortgage in full. I certainly can do both. So should I pay off my mortgage early or invest?.

Neither. It is not about making money anymore. It is about preserving of what you have earned and will be earning. This is the reality. Paying off mortgage early makes no sense whatsoever. It is actually the worst decision you can make at this point, and not just because you would loose your biggest tax deduction, but because you would loose liquidity and possibly the amount you use to pay the mortgage off. Simply put, once you sink money into your mortgage, it could be very difficult to get it back by cashing out your home equity. There could be multiple reasons:
- first is decline in your home value
- second is decline in your credit score
- third is first and second combined
- fourth is new banking/government rules making it harder to cash out
- fifth is anything else you can think of

Declining home values will make it impossible to get money back when you decide to sell. Many who advocate paying off mortgage early claim a false sense of security, something along the lines of – you wake up every morning and go to bed every night knowing that the roof over your head is 100% yours. The truth is you will very likely wake up and go to bed thinking that your money are tied up for good and have a rather bad feeling that when you need your money back, it will be hard or close to impossible. The argument that you will be saving interest on every dollar you sink into mortgage is so laughable, I will not even refute it.

If not to pay off a mortgage, should you invest? The question is invest in what?. Stock market is a rather bad investment. To me this is the biggest and constantly hyped scheme that fills pockets of professionals and make the fools poorer every time they make a trade. Like someone said to me – … stock market, hmm …, I’ll tell you what, I believe in stock market for others. The fella had invested millions in real estate, mainly town homes and duplexes. He started with close to nothing some 20 years ago, so he should be more or less all right, or at least, being close to being all right, even though he looked rather beat up two weeks ago I randomly ran into him, but that is whole another story. The truth of the matter is very few little investors consistently make money. Sorry ma’am, I consider you little compare with George Soros or Goldman Sachs. Ask Lehman Brothers or Bear Stearns if you don’t agree with me, they were large enough. If you need more convincing, read Make money by staying away from the Stock Market – the biggest fraud of the 20th Century? A confession of the former day-trader.

Should you invest into real estate? Nope. The real estate market has ways to go down. Even if it stabilizes, it is going nowhere. And to manage tenants? You don’t have time to manage you stocks. Managing companies take at least 6% of monthly rent payment, so it will eat into your profit. Throw in repairs and maintenance, the only returns on such investment will be headache and ulcer.

The only investment I would consider in your place is gold, silver and platinum, with main emphasis on gold. I would put 50% of your allocated cash in gold, 30% in silver and 20% in platinum. I would also look at this as wealth preservation first and foremost. I made my thoughts on gold known several times, long before everyone jumped along:
Buy gold while gold price is still low
Real estate, housing bubble, gold prices, falling dollar, stock market
Gold, Dollar, Bear Stearns, Lehman Brothers, Citigroup, Saint Patrick’s Day

Your should I pay off my mortgage early or invest is answered to the best of my judgment. The stocks that miraculously are almost all there today, as you put it, can stay there or you can sell them and keep money in money markets. I have said even before the 401(K) and IRA disaster, that the biggest advantage of both is tax savings you can get now and not some hypothetical returns most of us never get.