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If the corporate bonds are paying 3.75% and the mortgage costs 3.625%, we are talking a 0.125% spread. Even AAA corporate bonds are not without risk - strong-seeming companies can, and do, fail from time to time. If the failure rate is even 1 in 800 corporations more than normal - your 0.125% is wiped out, and you have nothing to show for your leverage "strategy".
If the OP has unrealistic understanding of what sorts of investment returns that are necessary to fund anything like retirement or even long term college plans perhaps they may also misunderstand what happens "locked up equity" in the value of their home...
If the OP has unrealistic understanding of what sorts of investment returns that are necessary to fund anything like retirement or even long term college plans perhaps they may also misunderstand what happens "locked up equity" in the value of their home...
I am facepalming continuously. I cant believe i had never heard about what a mortgage recast is, but i just called citi and they can do this, no problem, and they didnt mention any fees. They can do it twice per year! Thank you city-data!
Pre-Paying $100k on 3.625% mortgage has the identical cashflow as investing $100k in 3.625% CD. The term is how long you will hold the mortgage. If you want the math proof, will happy to provide.
If you are willing to buy 3.625% CD, then prepay your mortgage.
Pre-Paying $100k on 3.625% mortgage has the identical cashflow as investing $100k in 3.625% CD. The term is how long you will hold the mortgage. If you want the math proof, will happy to provide.
If you are willing to buy 3.625% CD, then prepay your mortgage.
If OP reamortizes the loan (to lower the monthly payment) instead of just paying it down, it is more like an annuity than a CD.
I am facepalming continuously. I cant believe i had never heard about what a mortgage recast is, but i just called citi and they can do this, no problem, and they didnt mention any fees. They can do it twice per year! Thank you city-data!
Honestly, I need you need a lender to run you though difference rate and term scenarios before you make a large prepayment. 30 year fixed versus 15 fixed versus 7 or 5 year ARM.
I am facepalming continuously. I cant believe i had never heard about what a mortgage recast is, but i just called citi and they can do this, no problem, and they didnt mention any fees. They can do it twice per year! Thank you city-data!
I really don't know why this is not more widely understood. There are all kinds of people accelerating the payment of their loans and not really getting "full value" for their efforts.
Mind you, I still am not at all sure that most of the people have done enough to make sure that paying down their loan is really the smart things to do (as homes can decline in value just like an other asset and it is darned hard to ever borrow as cheaply as you can with a mortgage), but if you goal is to not just "prefund" your mortgage but ensure the lender actually 'rewards' your choice to pay down your loan it makes sense to ask to for the recast which resets the amount borrowed and can give you more flexibility if future needs change...
most of you are making the mistake of only figuring interest per year. Now my story~ took $93,000. and put it down on house I bought previous year. After 2 1/2 more years my home was totally paid off. Now instead of looking forward to years of house payments I'm able to enjoy a retirement I wouldn't be able to fund if I had not paid home off. Considering what just happened to the stock market I'm glad I made that choice.
No, just depends what you did with the money. That's called opportunity cost. If you put it in a financial instrument with higher returns than your mortgage after taxes, you would be able to afford more in retirement. If you spent it on handbags or golf clubs or whatever, yeah. It's not hard to beat mortgage rates but it generally involves some risk so it really all depends on tolerance for risk and time. If you're looking 30 years out, it's a lot easier to accept risk. Market may go down over the shorter term, but over the longer term the noise isn't as relevant. 2 1/2 ish years ago, the market hasn't really done much. It's moved laterally for the most part. That's short-term, though. If you're looking at short-term, stocks really aren't what you want unless you're a speculator trying to time the market.
Don't even think about making advances to your mortgage servicer.
ha ha ha.
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Hope it helps you achieve your goals...
