All humor aside, that's essentially what I have, isn't it?
No, not at all.
All humor aside, that's essentially what I have, isn't it?
Absolutely!
Cap Gains is certainly an issue on the federal side and, depending on your residence, state too. It may affect IRA contributions, day Care credit and maybe even the child tax credit.
Meet with a tax pro, run the different scenarios.
This is exactly what my thought process would be. Even if you can afford the payment and its a low interest rate that is throwing away that money IF you can pay if off. Depending on age and being able to be disciplined about putting that money back as an asset then you'd be on the right track to get further ahead.How much do you pay in interest a month? $300? Interest is just like rent and you will never see that interest money again. I like the idea to pay off the mortgage but your personal discipline to rebuild that account might be tough. My wife and I freed up $600 a month and we keep buying things instead of stashing it away as we should.
Just wanted to make sure you’re suggesting borrowing money to invest in the stock market.
There is no single right answer to this question. Although I suppose if there was, it would be a real short thread. In theory, borrowing at 4% to make 6%+ is the right answer.
You're paying something like $4,000 in interest per year. In exchange for that cost, you are keeping a bunch of money semi-liquid and making a decent return, probably more than the $4,000. Is that $4,000 cost worth it to keep your powder dry and make a return?
To the peace of mind argument: if you keep the stocks, you can ALWAYS pull the trigger and payoff the house at any time in the future. Assuming you don't lose ALL your stock investments in the market, which would be quite a feat of stupidity. So the stocks are a security blanket, imho.
The only reason I can see to sell the stocks and payoff the mortgage is if you think the market is going to take a major dump. But that's timing the market, and tricky at best. If you truly think that, then I'd hedge it, and go halfway. Then you keep some stocks, still payoff a lot of principal, reduce the interest cost, and bring forward the day when it IS paid off by several years. If the market goes up, well, OK, you were half-right.
I looked at doing exact same thing more than once on my place. But I am paying 3.25% on a 15 year, and didn't make sense to me.
Good advice, Ramsey always talks about cash but he always wants you to basically cash strap yourself. How many times do you have hiccups over a few months that would burn up a grand (what he wants you to build up)? If you would need to take out a loan later on for a major house repair; you will have large fees to reinstall a note. Leave things in place or pay off a chunk to shorten up the loan here and there. It will give you some satisfaction with putting you in a bind.
The smart financial decision would be to keep the mortgage due to low-interest rates and continue to invest in stocks due to the S&P having a historical 7% rate of return. The difference between the mortgage interest rate and the market return would be your gain in wealth.
Having said that, how much further can the market continue to go up? How much upside is there left? I think that is the question you need to answer, and unfortunately, you may not be able to get a definitive one. There are some signs that the market is slowing down, so better to sell high than low.
Can you expand on this a little bit? I can't wrap my head around why getting a mortgage on a house that is going to hypothetically be worth 10% of its current value is better than waiting for a house's price to crash and then buying it with cash.Just keep in mind that real estate may not hold its value in the years ahead. The lack of mobility is critical. This is why I suggest grabbing 30-year mortgages NOW while you can. That is a hedge that in the darkest of days you can always walk away from. Paying cash may not be very wise at this point in the cycle. It would be far better to hedge a 30-year mortgage shorting sovereign bonds than perhaps waiting to buy at pennies on the dollar if its all crashed and burned.