Quote:
Originally Posted by jIM_Ohio
If mortgage is 4.75% or less, Most investors could beat that return, even with a 20-80 portfolio. 100% cash almost beats that return.
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Hmm... I wonder where cash could beat 4.75% today. Is there a time frame when the 20/80 portfolio would beat 4.75% rate? Sure you've got to earn much more because something will go to the taxman.
Well, we've decided to pay-off our 15-year mortgage that carries 4.75%. We'll do that in stages when some of our CD's expire. So, yes, for us it's very much emotional than financial (esp. DH will be happy about that
).
The reasons we will possibly do that:
1. 401k's and RothIRA's are maxed out;
2. No other debts;
3. We've been investing weekly/monthly in some funds/DRIP's in a taxable account for a few years;
4. We've got substantial savings and I don't know whether it's prudent to continue adding to them considering today's CD rates; We'd like to reduce the savings a bit.
5. Our itemized deductions exceed standard deduction by a small amount, so tax savings are less than $200 (maybe even less, I haven't done 2008 tax planning yet);
6. After paying the house off by April or May'09, we'll be able to replenish our savings again within 3.5-4 years (it could be 1-2 years sooner but we'll have one addn'l childcare expense by Feb'09) + add some more $$ to taxable investments.
All this scenario is based on that everything works fine in our lives. We'll execute our plan in stages because we'll have a baby in August and then hopefully grandparents from Germany will be able to come to babysit for a few months when my maternity leave is up. And also we'll be watching Fed's actions though I doubt they'll increase rates anytime soon.
If we don't pay off early, then our last regular mortgage payment would be late 2015, I think, because we did some prepayments the first two years we obtained the mortgage in 2003.
If we go with our plan, we'll have $20k+ in interest savings. Sure I've heard that inflation depreciates interest, but particularly for my DH it's great savings
.