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$ figures are rounded
So we had a home built, and financed before selling existing home. 6 months down the road we sold the first home.
We borrowed $437,000 at 4.875% (loan dates back to 2022), traditional 30 year loan with a "recast" added into the contract.
We netted $380,000 from the sale of our home.
Of course we would like to put that money to good use.
Should we -
1. Invest the $380K, and keep paying the $2325/month?
2. Pay down $200K and recast the loan for a lower monthly payment? Invest the balance?
53 years old, decent income, really no other debt.
With a mortgage at 4.875, I would be tempted to invest the money.
I would make sure I had fully funded my qualified retirement accounts and was taking advantage of any employer matches on any 401K from work.
BUT...
I would recommend you first consult your financial planner, or engage a good one if you don't have one.
how will that money be allocated if close to retirement? a balanced portfolio wouldn’t be worth borrowing money for as there is not much risk premium over a treasury …
you are in effect borrowing money to. vest keeping a loan and a portfolio. that is very different from your own money .
these is the added risk of not only paying interest in down years but also sequence risk is increased .
for me to want to keep a mortgage and invest i would want a greater risk premium over a risk free treasury and unless one is very high equities that isn’t going to happen easily or much with a balanced portfolio
With a mortgage at 4.875, I would be tempted to invest the money.
I would make sure I had fully funded my qualified retirement accounts and was taking advantage of any employer matches on any 401K from work.
/QUOTE] Fully Funded
[quote]mathjak107 mathjak107
the first two questions are
[quote=homestead123;66546278][quote]MikeJaquish Real Estate Agent MikeJaquish
With a mortgage at 4.875, I would be tempted to invest the money.
I would make sure I had fully funded my qualified retirement accounts and was taking advantage of any employer matches on any 401K from work.
/QUOTE] Fully Funded
Quote:
mathjak107 mathjak107
the first two questions are
how much longer to retirement?/QUOTE]
you need to think about the fact you are borrowing to invest in essence ….
if you are not going to be high equities, a balanced portfolio is hardly worth borrowing money to invest in . i suggest you read the article i posted above by researcher michael kitces
$ figures are rounded
So we had a home built, and financed before selling existing home. 6 months down the road we sold the first home.
We borrowed $437,000 at 4.875% (loan dates back to 2022), traditional 30 year loan with a "recast" added into the contract.
We netted $380,000 from the sale of our home.
Of course we would like to put that money to good use.
Should we -
1. Invest the $380K, and keep paying the $2325/month?
2. Pay down $200K and recast the loan for a lower monthly payment? Invest the balance?
53 years old, decent income, really no other debt.
Thank you!
You didn't mention other important financial considerations such as how much you have saved or invested at the current time. What sort of retirement program, if any, do you have and is it fully funded? Are you married and if so, what is your wife's financial situation? What other financial assets do you have such as money in the bank, stocks, bonds, real estate, etc?
Lacking these details, we can only take a stab in the dark. If you have other savings or liquid assets of about 6 month's worth of salary, then my suggestion would be to put all of the $380K toward your current mortgage. Then continue to pay the $2,325 per month until the mortgage is paid off which should be about 2 years or so. Then you will be debt free.
I don't like the idea of paying 4.875% interest unless you just have to. It's money down the drain and there's likely no sure way of earning more than that especially after paying taxes on your earnings.
One other question I would ask is you said you netted $380, 000 . So Tax man is going to want his share.. What did you pay for your first home- what improvements did you put int it over the years(Receipts you will need)- you subtract those- then that is your net and you have to report as a profit to Taxman.
Then think about what you get to with the difference after that.
One other question I would ask is you said you netted $380, 000 . So Tax man is going to want his share.. What did you pay for your first home- what improvements did you put int it over the years(Receipts you will need)- you subtract those- then that is your net and you have to report as a profit to Taxman.
Then think about what you get to with the difference after that.
I would say that it's very unlikely that he will owe any federal taxes on the sale of his house after the $250,000 or $500,000 exclusion for capital gains on the sale of his primary residence.
For details, read the following link:
"As a homeowner, you may have concerns about paying capital gains tax when you decide to sell your home. Luckily, there is a tax provision known as the "Section 121 Exclusion" that can help you save on taxes following a home sale.
In simple terms, this capital gains tax exclusion enables homeowners who meet specific requirements to exclude up to $250,000 (or up to $500,000 for married couples filing jointly) of capital gains from the sale of their primary residence. This means that if you sell your home for a gain of less than $250,000 (or $500,000 if married, filing jointly), you will not be obligated to pay capital gains tax on that amount."
I would say that it's very unlikely that he will owe any federal taxes on the sale of his house after the $250,000 or $500,000 exclusion for capital gains on the sale of his primary residence.
For details, read the following link:
"As a homeowner, you may have concerns about paying capital gains tax when you decide to sell your home. Luckily, there is a tax provision known as the "Section 121 Exclusion" that can help you save on taxes following a home sale.
In simple terms, this capital gains tax exclusion enables homeowners who meet specific requirements to exclude up to $250,000 (or up to $500,000 for married couples filing jointly) of capital gains from the sale of their primary residence. This means that if you sell your home for a gain of less than $250,000 (or $500,000 if married, filing jointly), you will not be obligated to pay capital gains tax on that amount."
Thank you. Finally, someone who knows what they are talking about.
Thanks, John.
BTW, there are a few simple provisions/conditions that must be met for the exclusion I cited to apply, but if the OP has lived in his house for the past couple of years or so, it's highly likely that he qualifies for this tax exclusion. Simply click on the article that I linked to and you can read about the provisions.
It's a fairly short article and written in relatively easy to understand language. If anyone has any questions, just holler.
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