The next step will be paying off the mortgage on new house before first payment is due.
I had a mischievous thought as I was waking this morning. Put the proceeds in a growth equity mutual fund. Several that I own have been growing more than 20% per year for ten years. Investing the proceeds and taking out 1% per month would pay the mortgage and leave several thousand a month on the table
Risk: stock market has a 25% correction and wipes out the capital required to pay off mortgage.
Reward: Having essentially no debt makes it very easy to borrow absurd amounts of money. If interest rates fall, as will eventually happen, stock market rises and we can refinance mortgage at lower rate increasing surplus from faster growing mutual fund
Any thoughts?
Of course if Biden beats Trump by 30 points and Democrats regain control of both houses of Congress, interest rates will rise and the stock market collapse. Of course, at that point some sort of revolution will happen.
depending on your timeframe and the cost of the house, that might be a good idea....even short term to just before the election. (You could always convert to cash like a week before).
ReplyDeleteWhat funds are growing at +20%? I'm struggling to find safe havens at much more that 12%
FCNTX has grown 420% since 2014.
DeleteI'm afraid that's not right. According to Yahoo! Finance, Fidelity Contrafund was around 10 in 2014, and is now around 18.That is damned good, but not 420%.
DeleteFidelity shows a 420% growth since 2014. %221,000. I think I put $10,000 in. Average cost basis is %4.76.
DeleteMy Fidelity account shows +$741,678.80 gain since 2014. +379.54% gasin.
DeleteI like the idea. I've never advocated paying off a low interest mortgage early. Borrow low, invest at a higher return.
ReplyDeleteThe new mortgage is 7%. Tolerable because I knew it would be only a month or two at worst.
DeleteDon't forget Capital Gains tax on the proceeds from the house.
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Delete"f you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. " https://www.irs.gov/taxtopics/tc701
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