What to do with Home Equity

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Posts: 7
Joined: Sun Jun 28, 2020 5:27 pm

Re: What to do with Home Equity

Post by LD1515 » Mon Jun 29, 2020 2:24 pm

huskerfan1414 wrote:
Mon Jun 29, 2020 9:38 am
LD1515 wrote:
Mon Jun 29, 2020 4:59 am
First of all ... WOW .... thank you all very very much for your feedback ... a quick summary of comments so far are

- Roughly 80-85% ... some version of "thinking too hard" ... invest any proposed mortgage payment into VG index fund of some flavor and go back to sleep ...

- Remaining 15-20% ... need more personal info ... pulling money out to invest may make sense under some circumstances ... ok ... here goes

Bio ... me age 53 ... wife age 53 ... sold business 2 years ago ... 2 children (one 24 and off the payroll (thank God) ... other 19 in college paying full
retail for tuition etc)

both scaled back working 2 years ago ... downsized our life/expenses accordingly to regain some peace ... will take occasional project
here and there ... those projects do not come by often but if/when they do we pass on most ... because we continue to pass, future
opportunities will probably come along less often

do not expect to have to financially contribute to our parents care

Finances ... 2 m taxable ... 1 m traditional IRA

thank you again ... looking forward to any/all responses ...
Dude, you've won the game.
Don't get back into the game.

Think of it this way: instead of being envious of others who might be increasing their net worth with more investing, realize people like me are doing so to get into YOUR position.
thank you for this ... i appreciate the perspective ... for what it's worth, envy never entered my mind ... just want/wanted to use capital smarter if possible ... everyone should want to do that regardless of circumstances

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Joined: Mon Jan 26, 2015 1:27 pm

Re: What to do with Home Equity

Post by av111 » Mon Jun 29, 2020 4:00 pm

LD1515 wrote:
Mon Jun 29, 2020 2:12 pm
one of the earlier threads on this discussion kicked around taking an interest only loan on the house (not sure if they are easy to get) ... current rates extremely low ... essentially becoming my own tenant ... free up my own capital ... invest the capital reasonably well (paying taxes on those gains) ... itemize, write off the loan interest payment and at the end of the interest only loan period do one of the following

sell house
refinance the house
payoff the loan

any merit to this general idea ... given current interest rates ... thanks in advance

What is the difference between "Interest only loan" and regular mortgage to you? It appears that you want to derive long term benefit from locked in equity.

It is better to write down the business plan. Something like

"I want to borrow 100,000 at 3% interest to invest in ______ so the invested capital can become ________ in ____ years"


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Re: What to do with Home Equity

Post by willthrill81 » Mon Jun 29, 2020 4:04 pm

LD1515 wrote:
Sun Jun 28, 2020 5:29 pm
It seems to me that having that amount of money tied up in something that doesn't grow isn't the best use of capital
You are earning an implied rate of return on your home equity roughly equal to prevailing mortgage interest rates, and that's likely an after-tax return as well. Depending on which mortgage you would have, that currently works out to a 3% to 3.5% probably after-tax return, which is almost unbeatable for fixed income these days.
Monsterflockster wrote:
Sun Jun 28, 2020 7:59 pm
Does it make sense to take a loan at 3-6% interest to invest? Would you be ok paying that interest on the full amount having lost 50% due to a crash? Would you sell or hold on long term?

Personally I’d leave the house alone.
Same. I don't want to put my family's shelter at risk so I can try to outperform mortgage interest rates.

If you have no mortgage, you can probably afford to be more aggressive with your investment portfolio than otherwise. And I say that having been on both sides of the fence. Now that our mortgage is gone, there's no way that I would take out a new one to invest.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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