Invest or Pay Down Mortgage to Refinance?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

Invest or Pay Down Mortgage to Refinance?

Postby kvthayer » Sat Feb 02, 2013 12:10 am

I'm 29 and I have about 150,000k sitting in a savings account and don't know what to do with it. I own a rental property with a 6.75% mortgage. I break even on rent if not lose a little bit each month. The house is underwater but I can refinance down to lower rate which will save allow me to cash flow about 10,000k a year; however, I need to put up 47k to close. Is it worth it to tie up that much cash? If not, suggestions of where I should put the money?
kvthayer
 
Posts: 1
Joined: 1 Feb 2013

Re: Invest or Pay Down Mortgage to Refinance?

Postby stilts1007 » Sat Feb 02, 2013 12:25 am

Was just in a similar situation (put a big chunk of money toward mortgage or invest it). Read thoughts & analysis from several sources. Ric Edelman is all about carrying the biggest, longest mortgage you can because you can invest and make a higher percentage in the market (probably) than you pay in mortgage interest, plus that mortgage interest is tax deductible. If you put a huge chunk towards your mortgage, then need/want that money for big unexpected expense, it can't come out of the mortgage nearly as easily as it can out of a mutual fund.
That said, the mortgage is a consistent, steady monthly payment, and obviously returns on the stock market can vary. We ended up sort of splitting the difference, put enough toward mortgage to get rid of our PMI and get a little better rate, then invested the rest. At the end of the day I say it's all about what makes you comfortable and lets you sleep easy at night.
User avatar
stilts1007
 
Posts: 85
Joined: 25 Jan 2013
Location: Chicago IL

Re: Invest or Pay Down Mortgage to Refinance?

Postby stilts1007 » Sat Feb 02, 2013 12:27 am

Either way I would encourage you to do SOMETHING with that giant chunk of cash. Probably not getting a great rate of return sitting in a savings account. I am accepting donations for my beer fund if you REALLY don't know what to do with it..
User avatar
stilts1007
 
Posts: 85
Joined: 25 Jan 2013
Location: Chicago IL

Re: Invest or Pay Down Mortgage to Refinance?

Postby Watty » Sat Feb 02, 2013 12:43 am

You didn't give enough information about your situation to really say what would be best. You didn't mention what the terms of the loans are and how much you are able to deduct on your taxes and this makes a big difference.

will save allow me to cash flow about 10,000k a year; however, I need to put up 47k to close. Is it worth it to tie up that much cash?


It wasn't clear just what the tax implications would be but if you save that $10K a year then you would save up that 47K in less than five years so it would not really be tied up that long.
User avatar
Watty
 
Posts: 4168
Joined: 10 Oct 2007

Re: Invest or Pay Down Mortgage to Refinance?

Postby zebrafish » Sat Feb 02, 2013 1:59 am

In the lack of complete information, a 10K per year savings by putting up 47K seems a pretty good return on investment
User avatar
zebrafish
 
Posts: 492
Joined: 24 Nov 2012
Location: Inside the tank

Re: Invest or Pay Down Mortgage to Refinance?

Postby LFKB » Sat Feb 02, 2013 2:18 am

I would spend the $47k to reduce the interest rate and invest the rest in Total Stock Market, Total International Stock Market and either Total Bond Market (if 25% or lower tax rate) or Intermediate Tax Exempt (if over 25% tax rate).
LFKB
 
Posts: 240
Joined: 24 Dec 2012

Re: Invest or Pay Down Mortgage to Refinance?

Postby JG605 » Sat Feb 02, 2013 7:14 am

zebrafish wrote:In the lack of complete information, a 10K per year savings by putting up 47K seems a pretty good return on investment


It would probably even be better that, assuming he'd refinance to a much better rate that 6+%.

I'd refinance.
JG605
 
Posts: 87
Joined: 25 Oct 2012


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: Bing [Bot], kenbogle, linakin, Luke Duke, placeholder, Rob54keep, Rolyatroba, sscritic, The Wizard and 50 guests