Mortgage Confidential: Pay mortgage or invest?

Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.

Q: David: I have two mortgages (both 30 years...about three years in on each...5.75% and 5.825%)...($165,000 and $270,000). I also have a $150,00 balance due on a HELOC -- prime minus one -- the HELOC is paid about $1000 a month but the interest is only about $600/month...I pay the this a good move or could the extra cash be better invested elsewhere/some other way....other suggestions?

A: You've got some really great rates right now, especially the HELOC which will continue to move lower alongside future Fed cuts. I get asked this question on occasion, should you pay down your mortgage or should you invest instead? I'm not a financial adviser but your question has other variables, specifically how old you are, how long you plan to keep the property (will you retire in it?) and how much current equity you now have.

If you invest $600, or more, each month in lieu of paying down principal are you guaranteed a rate of return? If not and you don't feel comfortable with the risk, consider paying down your mortgage instead. But often this isn't an "either/or" scenario, you can always do a little of both, but my advice here is to understand that you do have options but these questions need to be asked of your Certified Financial Planner...but whatever you do, make sure you've got some equity in your property at all times. If something should happen in your life that you'd need to sell quickly you want to make sure there's room to do so.

Real estate finance expert David Reedis president of CD REED Mortgage Bankers in Austin, TX and author of Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You and Mortgages 101: Quick Answers to over 250 Critical Questions About Your Home Loan.

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