Go to Jeff Salisbury LWGate Home Page.From: GeorgeS <pip@shore.net>
Subject: Re: persfin-digest V5 #41 Mortgae for Mutual Funds
Date: Thu, 6 Aug 1998 14:06:58 -0400
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> My question is should a refinance ( at around 7%) at a thirty-year
> mortgage and invests the cash (approximately $40,000) in a mutual fund.
I probably should work the numbers, but this seems like a non number issue.
At base, you are mortgaging something you need to live, your home, for
something you do not particularly need, the return on the money.
Now if things turn out well, the return on the money can pay off the
mortgage early. But.. if they turn out poorly, you can loose the house, or
at least, your fincancial interest in the house.
I've often wondered why folks consider a house an investment, to me, it's
where I live. To put it in play in the markets, like I would disposable
income, seems to treat it too lightly.
>From a tax point of view, you borrow the money at
(bank interest) (1- tax rate)
you make mone at a rate
(return on mutual fund) (1 -tax rate)
So the taxes drop out of the equation, and so long as the return on the
mutual fund is better than the bank interest, you are better off. Part of
the problem is the return on the mutual fund varies, sometimes you win,
sometimes you loose.
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