Tilted Forum Project Discussion Community - View Single Post - House refi

NoSoup · 04-03-2006, 08:38 PM

I'm going to go against the grain here...

The deciding factor in your case, though, should be whether or not that rate is fixed or variable. If it is fixed, I'd take a look at all the different options available to you, but if it is variable, it is unlikely that you will be able to earn more in interest less taxes due than you would just owing the lesser amount.

There is someone that I know quite well that had his house paid off a couple of years ago, but took a mortgage out on it for 80% of it's value when mortgage rates were absolute rock bottom.

Although it took quite some time for rates to get up there - at the time he did it savings and cd rates were dismal - he has a mortgage for just over $400,000.00 borrowed at a rate of 4.625% for a 30 year fixed loan. Even now, he is not earning much of a profit, if any. However, He's probably sitting on nearly half a million in cash, and as CD rates continue to increase, eventually it will pay off considerably.

To be honest, chances are you won't be able to turn a profit at this point, but keep in mind that noone knows how quickly the market will change.

It's a gamble, but depending on what you are considering investing in, and the time frame you are looking to keep it there, you it may pay off in the end.

Ah, and also - if you are earning 7% on a CD and paying 6.12% on a mortgage, you aren't necessarily making any money. You need to consider tax benefits as well. You'll likely be paying income taxes, possibly capital gains tax, on any profit that you make with that money. Additionally, you'll likely be able to deduct a portion of the interest you pay on your primary residence each year. Depending on your tax bracket and situation, the actual rate at which you will begin to profit could vary substantially.

I'd check with a local tax consultant and explain your situation to him...

04-03-2006, 08:38 PM	#4 (permalink)
NoSoup Non-Rookie Location: Green Bay, WI	I'm going to go against the grain here... The deciding factor in your case, though, should be whether or not that rate is fixed or variable. If it is fixed, I'd take a look at all the different options available to you, but if it is variable, it is unlikely that you will be able to earn more in interest less taxes due than you would just owing the lesser amount. There is someone that I know quite well that had his house paid off a couple of years ago, but took a mortgage out on it for 80% of it's value when mortgage rates were absolute rock bottom. Although it took quite some time for rates to get up there - at the time he did it savings and cd rates were dismal - he has a mortgage for just over $400,000.00 borrowed at a rate of 4.625% for a 30 year fixed loan. Even now, he is not earning much of a profit, if any. However, He's probably sitting on nearly half a million in cash, and as CD rates continue to increase, eventually it will pay off considerably. To be honest, chances are you won't be able to turn a profit at this point, but keep in mind that noone knows how quickly the market will change. It's a gamble, but depending on what you are considering investing in, and the time frame you are looking to keep it there, you it may pay off in the end. Ah, and also - if you are earning 7% on a CD and paying 6.12% on a mortgage, you aren't necessarily making any money. You need to consider tax benefits as well. You'll likely be paying income taxes, possibly capital gains tax, on any profit that you make with that money. Additionally, you'll likely be able to deduct a portion of the interest you pay on your primary residence each year. Depending on your tax bracket and situation, the actual rate at which you will begin to profit could vary substantially. I'd check with a local tax consultant and explain your situation to him... __________________ I have an aura of reliability and good judgement. Just in case you were wondering...