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- Thread starter SoapyCy
- Start date
You would need to clarify if this brokerage account is a key strategy to your retirement, or has it been built with discretionary funds?
If you believe you have retirement covered with other vehicles, I would tend to pay off mortgage, and then be disciplined to take a good portion of the mortgage payment and dollar-cost-average a monthly investment to rebuild the brokerage account.
I would do that anyway, but when you combine it with a great possibility of a market correction in the next 24 months, that will make your DCA strategy very effective.
If you believe you have retirement covered with other vehicles, I would tend to pay off mortgage, and then be disciplined to take a good portion of the mortgage payment and dollar-cost-average a monthly investment to rebuild the brokerage account.
I would do that anyway, but when you combine it with a great possibility of a market correction in the next 24 months, that will make your DCA strategy very effective.
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.
Option 3:
sell stock, pay off mortgage. Take a home equity loan for the max amount. re-invest in stocks. make a few bucks. sell stocks again. pay off mortgage. keep the cycle going
If you want to get real fancy add in: start an LLC (a investment company), expense the interest on the loan (since you won't on your personal taxes) and other expenses related to the business.
sell stock, pay off mortgage. Take a home equity loan for the max amount. re-invest in stocks. make a few bucks. sell stocks again. pay off mortgage. keep the cycle going
If you want to get real fancy add in: start an LLC (a investment company), expense the interest on the loan (since you won't on your personal taxes) and other expenses related to the business.
The average annualized return of the S&P 500 Index was about 11.69 percent from 1973 to 2016. Over the last 30 years, the S&P return has been 6.73%.
So it seems pretty well established that over the long run, investments will outperform the interest you pay on a mortgage. But, there is a sense of relief getting rid of your mortgage, especially if you are paying for mortgage insurance. So, logic says leave your mortgage in place. But if you foresee euphoria and peace of mind from being paid off, it may be worth it.
So it seems pretty well established that over the long run, investments will outperform the interest you pay on a mortgage. But, there is a sense of relief getting rid of your mortgage, especially if you are paying for mortgage insurance. So, logic says leave your mortgage in place. But if you foresee euphoria and peace of mind from being paid off, it may be worth 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.
Take out the principle (will be untaxed) and leave the interest. Will pay off a chunk and might motivate you to tighten your belt and just hammer it out.
Personally, I would keep the stocks. 4% for your mortgage interest is less than you will make in the stock market over the life of your mortgage. Another option is to do a little of both. Sell some of your long term stock and pay off some of your mortgage. That gives you a little piece of mind and lowers the amount of interest you will pay each month.
Dave Ramsey would tell you to sell the stocks that are not in a retirement account and pay off the mortgage at every time. If you have no house payment, you can save money like crazy and you have no risk (no house debt). Stocks can be risky with going up and down in value. Your house will probably continue to go up in value as well, which will increase your net worth.
I don't know about setting up LLC's to take advantage of tax codes and things like that. But at 4% interest I'd leave it alone. My financial guys have recommended in the past to not get too crazy paying off mortgage for the same reason. Or at least not be your first goal. Max out 401k and IRA and 529 first.
I've grappled with this same decision for some time.
Dave Ramsey would say: you are ignoring the risk of holding the leveraged real estate. You should pay off the debt
Martin Armstrong and many other economists say lock in these low rates and use it as a hedge against future interest rate increases.
https://www.armstrongeconomics.com/uncategorized/the-end-of-30-year-fixed-rate-mortgages/
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.
https://www.armstrongeconomics.com/real-estate/economic-real-estate-bubbles/
Dave Ramsey would say: you are ignoring the risk of holding the leveraged real estate. You should pay off the debt
Martin Armstrong and many other economists say lock in these low rates and use it as a hedge against future interest rate increases.
https://www.armstrongeconomics.com/uncategorized/the-end-of-30-year-fixed-rate-mortgages/
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.
https://www.armstrongeconomics.com/real-estate/economic-real-estate-bubbles/
Don't you get a tax deduction for mortgage interest payments? That, plus stocks return higher than loan interest rates makes me say keep the mortgage. Depends on if you file with itemized deductions or standard, and whether you think there is a market correction looming or if there is a housing market price bubble. That being said, I paid off my mortgage early, because the interest was 8.625% (outrageous).
I'd sell the stocks and pay off the debt, before the next election.
You mortgage interest is really low and you can earn a higher rate in the market. Don’t pay off loan, convert your stock holdings to index funds and spend more time with family and stop researching stocks
Just wanted to make sure you’re suggesting borrowing money to invest in the stock market.
Key word and that is good advice. With no discipline it is a stupid idea to pay off the mortgage. Maybe invest half of what you normally would and put the other half on the mortgage? Gauranteed 4% return on 1/2 your future investment.