What would you do if you won $150,000 in a lottery?

[jeffman]

moneyphone!

[Dan02]

Originally Posted by Canehdianman

Not sure where you can beat 3% return, risk-free.

I'm pretty sure there are tons of people out here who can vouch that real estate is not risk free.

[puffnstuff]

I'd probably complain about not winning more...

[CaptainCrunch]

Dangerous Drugs

[afc wimbledon]

The mortgage is a tax free 3%, doesn't affect your income tax rate, and is doesn't accrue capital gains tax when you sell it. Investments not so much

[Arya Stark]

Originally Posted by Canehdianman

Not sure where you can beat 3% return, risk-free.

Risk free? Not risk free at all. And plenty of places where you can beat 3%. Like I said, overseas high interest bank account is one place.

[Robbob]

I probably would put the max allowable for that once a year payment. The majority of remainder would go to top up TSFA, gift some to parents and plan a vacation.

[ken0042]

Can somebody please explain how paying down your mortgage is not risk free? I understand the market could tank and your house could end up being worth less; but you would still owe the bank no matter if you owed $400K or $250K. I'd even say that if the market fell enough that your $500K house was now worth $350K, you would be in a better position than if you were under water on the mortgage.

[Arya Stark]

Originally Posted by ken0042

Can somebody please explain how paying down your mortgage is not risk free? I understand the market could tank and your house could end up being worth less; but you would still owe the bank no matter if you owed $400K or $250K. I'd even say that if the market fell enough that your $500K house was now worth $350K, you would be in a better position than if you were under water on the mortgage.

What if your house had a 400k mortgage and it was worth 100k and you could no longer afford it and had to sell? So you sell and likely have to claim bankruptcy and are left with zero, actually owing the bank money. I know I'd rather have that 100k in cash or in a bank account nobody could touch.

The crash in the 80's in Calgary is proof that real estate is not always risk-free.

[jayswin]

Originally Posted by Robbob

I probably would put the max allowable for that once a year payment. The majority of remainder would go to top up TSFA, gift some to parents and plan a vacation.

You have a Tax Savings Free account? Sorry to hear that. I'm no banker, but I'd highly suggest getting out of that if you can. TFSA's are where it's at.

[ken0042]

How could you claim bankruptcy with $150K in the bank or in investments somewhere? To be really insulated your would have to have that money somewhere in cash, and then lie in your bankruptcy proceedings. (Which I'm thinking must be illegal.)

[Arya Stark]

Originally Posted by ken0042

How could you claim bankruptcy with $150K in the bank or in investments somewhere? To be really insulated your would have to have that money somewhere in cash, and then lie in your bankruptcy proceedings. (Which I'm thinking must be illegal.)

I thought personal bankruptcy and business bankruptcy were two different things? I don't know, I'm no expert but to me paying off your mortgage is a bad idea unless you can really afford to and if I was in the OP's position there is no way I'd put a cent towards my mortgage. Start a business, incorporate yourself and I think you are protected but I could be wrong.

And lying is illegal but I'd rather lie and have 100k for my family than give it up to keep my good morals.

[Arya Stark]

This is a good article from Forbes.

http://www.forbes.com/sites/robrusse...your-mortgage/

4) How Much Have You Saved?
If your house was paid off today would you have enough savings to carry you to and through retirement? A good rule of thumb is that your investments and savings should be at least double the value of your home (assuming it was paid off). So, if your home is worth $300,000 you should have at least $600,000 in investments after paying off your mortgage, after all your home can’t feed you in retirement, but your investments can.

[ken0042]

Originally Posted by Arya Stark

I thought personal bankruptcy and business bankruptcy were two different things? I don't know, I'm no expert but to me paying off your mortgage is a bad idea unless you can really afford to and if I was in the OP's position there is no way I'd put a cent towards my mortgage. Start a business, incorporate yourself and I think you are protected but I could be wrong.

So, what you are saying is that starting a business is less risky than the long term real estate market?

[CalgaryFan1988]

A financial advisor would recommend paying off your mortgage. At least in my experience.

[Arya Stark]

Originally Posted by ken0042

So, what you are saying is that starting a business is less risky than the long term real estate market?

No, not at all. Nobody but one poster who brought the "risk-free' out of thin air is saying that no risk is what is required.

The OP didn't ask for risk-free advice. And besides paying off part of your mortgage is not risk free.

In my situation I would not pay it off. If my dad won I'm sure his mortgage would be the first place he'd put it since he has a lot of investments and a nice retirement fund from work. Everyone is in a different situation.

[Slava]

Originally Posted by CalgaryFan1988

A financial advisor would recommend paying off your mortgage. At least in my experience.

I am a financial advisor, CFP and working on my CFA. I would tell you that it does depend on your exact situation, but if the point is long term wealth creation, I wouldn't put it on the mortgage. I would invest it for sure, and almost surely over the long term not lose any sleep to beat that 3% mortgage savings as an alternative.

[Finger Cookin]

This thread got super boring. No hookers and blow? No sharks with lasers?

For shame, CP. For shame.

[ranchlandsselling]

Originally Posted by ken0042

So, what you are saying is that starting a business is less risky than the long term real estate market?

Paying off your mortgage might be the easiest place to go for the average individual.
That said, it's foolish to have your capital tied up in one asset class. Who cares about the mortgage, if rates are low and it's cheaper then renting you can do better elsewhere.

How often in the last few years have investors said they’re staying out of the equity markets because of the volatility we’ve experienced recently? Many of them are waiting on the sidelines “until things are back to normal.” That raises the question: what exactly is normal for equity returns?
Usually when people think of “normal” returns, they look at historical averages. According to the Credit Suisse Global Investment Yearbook, stock markets in the developed world delivered an annualized return of 8.5% over the last 112 years. Using that average as the midpoint in a range, it seems fair to say that “normal” historical stock returns are between 6% and 11%.

Let's for an instant play in a vacuum.

You have 150k mortgage, no savings, house worth 200k and you just won 150k. Mortgage rate is 3.0%.

Pay off mortgage. House prices go down to 100k. You've now just lost the earning potential of $50k. You've got more cash flow, but you're out $50k for the time being.

Don't pay off mortgage. House prices go down to 100k. You've still go the same mortgage, you're paying 3.0% on it, oh well, no different than before you won the money, but instead you've got a diversified portfolio of equities earning money. You're paying off your mortgage as you were before and if the housing market comes back, great, you've also got equity again. Stocks can go down, they can go up, houses can go down, they can go up. Don't still all your eggs in one basket. If you're in your middle earning years why tie up the money in an illiquid asset that historically has performed worse than the markets when you can also borrow against that asset for rates much much cheaper than historical standards.

Start a business risky? yeah, but if you sell the business you can have tax free gains of up to $500k if eligible.

[Rerun]

Surprised nobody has suggested taking a $1000 dollars and placing a bet in LV for the Flames to win the Cup.... odds are 66/1.