Reply to If you don't have a 15 year mortgage, you're living beyond your means?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We refinanced to a 2.875% 30 year conforming mortgage during the first year of the pandemic. It's still a great decision because there are very few areas where we can get that kind of leverage and invest the rest in the stock market. Oh and we have a PITI ~$3K and nearly $1 million in home equity ($1.5 million home). With inflation where it is, having low cost, long term fixed debt is a great "investment". Right now, I can invest our cash in a high earning account! It has nothing to do with living beyond our means. It's the equivalent of shorting Treasuries.[/quote]

I’m one that is absolutely in favor of the 15 year route. That being said, well played…assuming you’re being truthful. I refinanced with a cash-out refinance mortgage from a 15 year to a 30 year with the sole objective of having money to invest in growth equities post-COVID crash. My monthly payment didn’t change, but I walked away with more than $1M in cash that I turned around and invested in the market a few months back. Portfolio is already up from $1M to $1.7M. [/quote]

I'm the PP. I think a 15 year is fine but it reduces your flexibility and only provided 40-50 bps of interest rate savings relative to a 30-year (at least at the time I was considering a refi). For some, a 15-year is a good way to create forced savings if you lack discipline elsewhere in your financial budget. While I could save a little on interest, I figured having the flexibility to accelerate the paydown on a 30-year (to make it a 15) was better optionality. However, since inflation spiked, I've stopped all prepayments. I am happy to make my minimum fixed payment each month and if inflation continues at an elevated rate, it will look better and better with time That's our only debt and with a PITI of ~$3K, it's lower than we'd ever get for an equivalent apartment in our area of Montgomery County. [/quote]

Our 15 year payment was lower than the 30 we originally had when we refinanced as the interest rate was lower.  We always pay extra to principal.   Cannot wait to pay it off. [/quote]

Why? If it's a good rate, you're better served saving the excess cash and using it to invest in the market long term. For us, paying a 2.875% interest rate that is also tax deductible is much lower than the long-term return on other investments. I get that there is a psychology benefit to being completely debt free. However, "good" debt with modest leverage can actually enhance your returns.[/quote]

It’s not really tax deductible depending on how much you pay in interest.   We don’t see any benefit in our taxes.  We also max out retirement, good amount in college funds and integer. [b]Why not do it all? [/b]  Out interest at this point Is a few hundred a month.  Why not pay it off and take the entire payment and invest![/quote]

OK PP, I agree with you that if you have unlimited funds, you should not have a mortgage.  [/quote]

Seriously, it's a stupid question if you have so much money that you don't need to finance a home. That said, even the ultra wealthy use low cost debt to finance real estate, private equity, and even their market equity investments. Berkshire and other insurance companies do the same with float on liabilities because it enhances returns. I don't see what is so hard to understand. OP and the PP just don't like the fact that paying down debt isn't always a good investment strategy.[/quote]

This.  A friend who cashed out in tech and retried at 30 took out very low rate student loans for his daughter’s college because his money could earn more invested than the loan interest.

OP is clearly a troll, but this would be more fun if they understood money better. [/quote]

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