Sold our house and am currently sitting on 280k cash. Throw it at our current mortgage (6.3%) or invest in something like tbills or dividend fund and offset the interest I’m paying?
Current mortgage is manageable but not ideal but I would like to grow the cash pile to use for other things.
Appreciate you all in advance for advice given!
Sold house at 100% equity. Now what?
byu/Leather_Baker8624 ininvesting
Posted by Leather_Baker8624
15 Comments
At 6.3% I would pay off my debt. ESP in a powder keg market right now.
Depends on a lot of other factors. Age? Target retirement year? Income? Etc.
Personally, I would invest it in high risk diversified funds and forget it existed, but that’s based on my circumstances and risk tolerance.
Depends on your total mortgage and how much money you make at work, if any.
How long from now do you expect to need the cash like money and how much of it do you expect to spend in that time frame?
If it were me, I’d immediately invest 200k in a 80/20 ratio of VTI/VXUS and spend the next 2 years dollar cost averaging until all is invested.
Do you pay PMI currently? Otherwise I think it depends and how much equity you have in the home already and how long you plan on staying there. Also what % of your monthly gross or net income goes to your mortgage currently. Tbills can’t offset a 6.3% mortgage rate as they don’t pay that high currently.
Without knowing the answer above I’d say you should at least pay some of that $280k towards your mortgage. You’re guaranteeing interest cost savings of 6.2% on that principle amount. If you would rather have a lower mortgage you can look into a recast for a small $100-500 fee. Or you can keep the payments where they are and save interest cost by making a large principle only payment.
No investment guarantees 6.3% returns right now. If you want to take on some risk and play the arbitrage game then put some of it into the stock market. Hysa’s, tbills, CD’s or money market aren’t going to be paying enough to offset the interest savings. The only way to outpace that is to take on risk. That’s more a personal choice and depends where you are financially otherwise
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I probably would’ve had a plan before deciding to sell that house.
What is your age and retirement horizon? If this is a 30 year thing then I’d probably put in the market. If you have less than, say, 10 years until retirement then paying off the mortgage is a pretty good “return”.
When you sold your home, didn’t the mortgage company get paid first since they hold the title?
If unsure, go 50/50. 50% towards existing mortgage and 50% into say VTI.
No one says it needs to be all or nothing.
Pay off the debt. You can always mortgage the house again for investment.
Current headwinds, promised new tax, more tax, the economy.
You could beat the spread by investing at 9%+ *if there is solid growth over 5 years*, but that’s taxable anyway vs. mortgage interest avoidance which is tax free. You could also have a flat or falling market over 5 years. Imagine the sorrow if you borrow money at 6.3% to invest and then be at -20% three years later vs. paying of the mortgage and then DCA into the market with all the income that isn’t paying a mortgage. Cut your risk; pay the debt.
Definitely don’t put into tbills when your mortgage rate is almost double the yield on tbills. The answer is either put it into a broad index fund or pay the mortgage. Safer of the two is paying off the mortgage but in the last 15+ years you would have made more money in the index fund
I am a no debt guy. When I was sitting on large sum of money after the sale of my house I paid everything that I owed money on (student loan, credit card, autos) and that didn’t amount to a whole lot and I put a bunch as a down payment on my next house. I did leave some cash in savings if rates fell to refi without rolling costs into the refi note and a rainy day fund. Rates have not dropped to make it worth a refi yet so money just sits. I really should have it in a high yield savings account.