Would it be a better move to pay off a home equity loan from our investment money? The loan (used to refinance student loand debt) is down to $13,000 at APR 4.24%. We are only required to pay the interest each month. We have investments of over $500K, and personal savings of approx. $100K. Our investments seem to have taken a beating recently, so my thinking is to pay off the loan (the only debt we have), and then put that extra money into savings/investments. My husband is 60, but his industry is drying up and works only sporadically, I am a part time church secretary. Due to an inheritance, this is the first year we’ve been able to itemize and use the loan interest on our tax return, but it’s not very much. We own our home. Thank you so much in advance for your comments.
Terry Says: Well, because you’re paying interest-only on this loan, you will have to face up to paying it off in full at some point — when the loan matures. In the meantime, that interest is money down the drain, even if it is a deduction! I’d say you should pay it off out of your savings. Then you should take a good look at your investment diversification and your financial plans. Also, you might want to consider purchasing a combination life/LongTerm Care Insurance policy, so that an illness doesn’t wipe out your savings. I’m just about to post a column on finding a financial planner — so please check back to read it.