Cash out refi to invest in stock market?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Amazing that virtually everyone has said it's stupid to do a cash-out refinance to invest in the market, but everywhere else in this forum, it is an article of faith that one should never make additional principal payments on one's primary residence and should instead invest as much as possible in the market. Folks, when you invest in the market instead of paying down your mortgage, you are doing the EXACT SAME THING that the OP asked about!! I have always said that people's primary savings goal should always be to first pay off the mortgage on their primary residence (for the exact reasons mentioned in this thread), yet that idea is always met with scorn. Of course, averaged out, the market returns are higher than the 3% that you get from paying down your mortgage, but maximizing returns is for people that have already achieved some baseline stability - you don't play games when you don't even have a roof over your head secured!

Plus, we have been in a bull market for so long that many people have forgotten that markets can go down!

Uh it's not the same thing. OP is talking about taking out $ that you already paid. You're talking about paying extra. Both are stupid, what makes sense is to just pay your mortgage and then invest the rest in the market, vs paying extra. (Or taking $ out and putting it in the market--that seems too messy)

Um, they are the EXACT SAME THING - they are both ways of borrowing against your house to invest in the stock market. When you don't pay down your mortgage, you are choosing to continue borrowing against your house to invest in the market. It makes no difference whether you are pulling out money implicitly in the present (by not paying back your mortgage) or pulling out money that has actually accrued in the past. IT IS THE SAME THING and smart people don't leverage up when they don't have a basic foundation to stand on.

[Anonymous]

Once again, no it isn’t. There are usually costs with any Refi.

[Anonymous]

Anonymous wrote:Good idea, but careful what you invest in. I would not do etf, too slow for me and not worth the trouble.

Whaaat??!!

[Anonymous]

Signs the Market is in a Bubble 101 by OP.

Great book

[Anonymous]

Anonymous wrote:What a dummy. Market at all time highs but let’s borrow against our home and put it into a market that will be flat or down this year

How do you know the market will be flat or go down? I want your crystal ball.

[Anonymous]

Anonymous wrote:It may complicate your taxes, as you likely won't be able to deduct interest on the portion of your new mortgage that exceeds your old mortgage. For this reason, it may often be better to take a larger mortgage in the first place.

Tax treatment aside, there's no real difference between "borrowing against your house" -- that is, increasing the amount of your mortgage -- and taking on a larger mortgage at purchase. So if you're contemplating increasing your mortgage from $X to $Y, the question to ask yourself is if you were buying your house today, would you finance $Y of the purchase price? $X? Some other amount?

This is good advice. I could pay off my mortgage, but I don’t, because I’d rather have the cash in the market — up to a point. I have about 50% equity in my house, and my investments could take a significant hit, and I could still pay it off. It’s all about balance.

[Anonymous]

Anonymous wrote:
It may complicate your taxes, as you likely won't be able to deduct interest on the portion of your new mortgage that exceeds your old mortgage. For this reason, it may often be better to take a larger mortgage in the first place.

Tax treatment aside, there's no real difference between "borrowing against your house" -- that is, increasing the amount of your mortgage -- and taking on a larger mortgage at purchase. So if you're contemplating increasing your mortgage from $X to $Y, the question to ask yourself is if you were buying your house today, would you finance $Y of the purchase price? $X? Some other amount?


How do they even check this? You get a single tax statement from the mortgage company, correct? What prevents you from deducting the entire mortgage when you itemize and how does the IRS check this unless the mortgage company also reports to the IRS the interest split between previous mortage and cash-out refi?

They do report this to the IRS. Have you ever looked at those statements they send you? They actually have a line for the nontaxable interest that you can deduct. Or maybe you just take your "stuff" to an accountant and let them do it. The accountant is not going to cheat on this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Amazing that virtually everyone has said it's stupid to do a cash-out refinance to invest in the market, but everywhere else in this forum, it is an article of faith that one should never make additional principal payments on one's primary residence and should instead invest as much as possible in the market. Folks, when you invest in the market instead of paying down your mortgage, you are doing the EXACT SAME THING that the OP asked about!! I have always said that people's primary savings goal should always be to first pay off the mortgage on their primary residence (for the exact reasons mentioned in this thread), yet that idea is always met with scorn. Of course, averaged out, the market returns are higher than the 3% that you get from paying down your mortgage, but maximizing returns is for people that have already achieved some baseline stability - you don't play games when you don't even have a roof over your head secured!

Plus, we have been in a bull market for so long that many people have forgotten that markets can go down!

Uh it's not the same thing. OP is talking about taking out $ that you already paid. You're talking about paying extra. Both are stupid, what makes sense is to just pay your mortgage and then invest the rest in the market, vs paying extra. (Or taking $ out and putting it in the market--that seems too messy)

Um, they are the EXACT SAME THING - they are both ways of borrowing against your house to invest in the stock market. When you don't pay down your mortgage, you are choosing to continue borrowing against your house to invest in the market. It makes no difference whether you are pulling out money implicitly in the present (by not paying back your mortgage) or pulling out money that has actually accrued in the past. IT IS THE SAME THING and smart people don't leverage up when they don't have a basic foundation to stand on.

We know nothing about OPs foundation. A mortgage is one of the easiest ways to leverage up once you are in a position to take additional risk.