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Thread summary:

Investing question: mortgage, college fund, retirement fund, banking system, savings account

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Old 03-27-2007, 02:53 PM
 
Location: New England
786 posts, read 882,141 times
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Money in the 529s count as your assets, not the kid's, when you apply for financial aid, and it's tax-free so long as withdrawals are used to pay qualified education expenses.

It sounds like you've handled your money pretty well over the years and are in a position to take some risk with the money. How risk-tolerant are you, anyhow? I'd be most inclined to pick some total return fund(s) and sock the money in there monthly.

True, earnings on taxable investments are taxed, but the mortgage interest you pay is tax-deductible, too. So the idea of comparing an after-tax return on investments to the pre-tax mortgage interest rate isn't really sound. With the tax savings you get on a 5.125% mortgage, your after-tax cost of financing really isn't very high, and I would think it wouldn't be too hard to beat that after-tax return even without taking a whole lot of risk. There's a lot of good funds out there, depending what your goals are and what you see the economy doing going forward. If you were fairly risk-tolerant, I'd be looking at some capital appreciation fund like PRWCX or a global fund like VGRIX. If you're less risk-tolerant, there are some good asset allocation funds out there, too, like VWELX, which hold a chunk of assets in bonds to cut the volatility.

So, mathematically, I think there's a lot to be said for not paying off the mortgage more quickly. But psychological factors count, too... if that's really important to you and will buy you some peace of mind, then I don't think there's anything wrong with that.
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Old 03-27-2007, 03:40 PM
 
Location: Happy wherever I am - Florida now
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Yes, putting that towards the mortgage every month is the best idea. I didn't want to see you pay for 10 years and then have to refinance for another 30 for a total of 40 yrs. Paying it off with extra payments early is good even if you ride out the present loan. The longer the number of years of mortgage payments, the more you're paying for your house in the end.

Good luck
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Old 03-29-2007, 03:21 PM
 
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Here's my thoughts, pay into the mortgage an additional 200 per month applied to principal, check your contract to look for the refi clause, you may not be able to refi until a certain time frame, you have a lifetime cap at 6% that can put you in a world of hurt, 2% a yr cap well in 3 years after the first 10 years your looking at a possible 6% increase, dump it and get a fixed rate depending on your refi clause.

Now you still have 200 a month disposable income to put somewhere, put it in a money market and let it build then when it's built up buy growth stock, you'll pay interest on the income from the money market but you need a place to park it while it builds, then your growth stocks won't be paying dividends so no tax until sold or if they would pay out dividends just reinvest them.

You could go into mutuals putting the 200 a month in kinda like dollar cost averaging again reinvesting any dividends, lots of ways to go there too depending on your age & how much risk you want to take, no load vs. load depending on who you talk to one says go no load the other says load, lotta stuff to look at on that issue, fees, 12b, managers track record, etc, never look at the this year it's making big return crap since all that's doing is chasing returns and your not going to win in the long run, all your doing is trading not investing and uncle sam will love you for that, if you have to move into a different type fund for a better return stay within the family, bottom line is if your making a good return on a loaded fund vs. smaller return on no load, if you don't have the resources & time to check into funds go with a good broker, but not ed jones, sure they get commission but your getting advice & knowledge in return for that plus he has sources that the general public doesn't, having a good cpa is a real need also since they know all the ins and outs of the tax problems.
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