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NRF matched Millbank in TX yesterday
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22F/NYC not mid 20s but here I am
Vive la France !
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I’m exhausted from interviewing and caseing 🥵
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Rising Star
After figuring out FI/RE I am less motivated.
Is this for real?
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I would probably not prepay a mortgage with that low rate. If I got a good rate and could afford it, I see no problem with a 15 year. 30 year is fine too. Up to you what you want to do. Some people just want to be debt free and then will have more to invest later. Some don’t mind a mortgage and would rather invest now. No right or wrong answer. Just personal preference and you won’t know what is best until far down the road
You are very likely correct. But you could be wrong. Some people like to be more conservative and are debt averse. There is nothing wrong with that. It may reduce behavioral errors that would hurt returns. All I am saying is that you won’t know for sure until after the fact which was the right decision. Historically you are correct and likely will be going forward but can’t be sure.
Rising Star
Do you think you can earn more than 4% over the long run? If so, then invest it, don’t pre-pay.
Refinance comes down to the cost to refi, interest rate change, and break even point, which is a pretty straight forward to calculate.
Rising Star
When rates were in the 4’s or 5’s, pre-paying and getting a better rate by crossing certain LTV thresholds made sense. With rates in the 2’s, and a bull market, investing will often net out ahead pretty quickly.
Invest.
Also, it does not take 10+ to break even. You literally break even on the difference immediately.
Rising Star
I have $1.2M interest only mortgage at 1.5%
Allows me to plow an extra $30k/yr into investments
Pro
I refinanced this year to a 10 yr at 2.125%. I was paying extra each month with the goal of having it paid off in 7 but then bought a second house and stopped paying extra. My goal is to retire in 7 years and I don't want to be making mortgage payments on my primary home by then. I get that I could have taken the extra $1500/month I was putting into my mortgage into the market and it would have returned more than 3-4% that my mortgage has averaged over past 10 years that I have made extra payments. I wasn't paying extra at the beginning and I took money out at some point in the past. It's easy today to look back over the past 10 years and say that I should have invested instead. But hindsight is alway 20/20. I have no regrets and will be happy not to be making mortgage payments (at least on this house) once I retire.
6-8% is average. Not compounded I think. You are not guaranteed a positive return each year. In loss year your asset gonna shrink and takes longer to recovery. Compounded is misleading I think
I have the cash to pay off my mortgage but I’m just paying the minimum (2.5%, 30 years, refinanced almost a year ago) so I can put the rest in ETFs
IHistorical SP500 return is ~6-8%, before the covid manic. My current option is 2.125% 15yr or 2.75% 30yr. It takes 12-15 years to have the net worth to break even if I invest the extra cash from 30year mortgage. I feel even if the investment end up doing better than the saving I have from 15y r low intetst、 it doesnt seem big enough to fully convincr a rusk adverse persok like me haha. So just trying to understand I’m not missing other facts..
Pro
I ran a model with the following assumptions. loan of $600k at 2.5% vs investing at 8%. If you make an extra $500/month payment the loan term is reduced to 275 months from 360 months. if starting at month 276, the full mtg payment + the additional 500 is invested. balance at 30 years is $745k in the investment from start account and $332k in start investing at month 276 account. If the loan is at 3% and the investment is a 6% the difference shrinks (obviously). However this all assumes a constant return.