Pay off new mortgage Terry’s Bright Idea!~
Recently bought a new home out of state with a 4.25% assumable mortgage on remaining $200k. Our monthly bills will include: $250 hoa, $300 homeowners ins, and $300 prop taxes. We have $1.7 million in assets. Husband wants to invest that $ and I want to pay it off entirely so I can sleep better. 30 year mortgage at this age, yuck! Or does the rate make a difference?
Terry Says
The rate makes a BIG difference. Right now, your interest rate is basically a match with inflation, and a gift in terms of borrowing rates. BUT, I understand your concern. Ask your husband how he is investing this money — and how he would feel if a bear market wiped out 50% of it! (Yes, that could happen!)
So maybe a compromise is in order — and you’ll see who comes out ahead in a year or two. Take HALF and buy T-bills, currently yielding just over 5% for 6 months, and roll them over automatically at maturity. Read this: T-Bills beat CDs – Terry Savage
And let him invest the other half! Don’t supervise his half. Set a deadline, maybe 2 years out. And you’ll have definite proof of what was the smarter move! And please, write back and let me know the results!!
