4 ms·

Why would I want to sell investments that are returning an average of 7+% a year to pay off a mortgage that I'm paying 2.9% on? The bank is welcome to let me us

by User23 5y ago

Why would I want to sell investments that are returning an average of 7+% a year to pay off a mortgage that I'm paying 2.9% on? The bank is welcome to let me use their money. Even if you don't have any investments, assuming you're under 50 you're still better off paying the minimum on your mortgage and investing the surplus rather than extinguishing a 2.9% liability.

globular-toast 5y ago
Because "investments" could stop returning 7% at any time, mortgage interest rates could rise at any time and you can live in a house, you can't live in stocks and shares.
- sokoloff 5y ago
  The overwhelming majority of mortgages in the US are fixed-rate products (at this time of low interest rates). Interest rates can do whatever they want from here and it won't affect the typical existing mortgage. (If they go high enough, a legacy low-rate mortgage becomes even more valuable to continue to hold.)
  - globular-toast 5y ago
    How long are they fixed for? I don't know anyone to be on longer than a 3 year fix in the UK.
    - sokoloff 5y ago
      In the US, fixed rate mortgages are fixed for the entire term of the mortage. Anything else is called an adjustable rate mortgage (ARM) and those are often 3/1, 5/1, 7/1, or 10/1 (referring to the length, in years, of the original rate and then the period, in years, of each subsequent adjustment period [note that if you see a /6 mortgage, that's adjustable every 6 months after the initial period, not every 6 years]). It used to be that ARMs would have a "teaser" rate for that first period, which made them make sense to take out for some circumstances. Now, fixed rates dominate because the ARM rates aren't much lower than the fixed rates.
- quitit 5y ago
  I agree if one chooses to invest in riskier investments, but it's straight forward to invest in financial products that provide a rate that move in lock-step with home loan interest rates. These products are lower-earners, but there is limited exposure to risk.

by User23 5y ago

globular-toast 5y ago

Because "investments" could stop returning 7% at any time, mortgage interest rates could rise at any time and you can live in a house, you can't live in stocks and shares.

sokoloff 5y ago
The overwhelming majority of mortgages in the US are fixed-rate products (at this time of low interest rates). Interest rates can do whatever they want from here and it won't affect the typical existing mortgage. (If they go high enough, a legacy low-rate mortgage becomes even more valuable to continue to hold.)
- globular-toast 5y ago
  How long are they fixed for? I don't know anyone to be on longer than a 3 year fix in the UK.
  - sokoloff 5y ago
    In the US, fixed rate mortgages are fixed for the entire term of the mortage. Anything else is called an adjustable rate mortgage (ARM) and those are often 3/1, 5/1, 7/1, or 10/1 (referring to the length, in years, of the original rate and then the period, in years, of each subsequent adjustment period [note that if you see a /6 mortgage, that's adjustable every 6 months after the initial period, not every 6 years]). It used to be that ARMs would have a "teaser" rate for that first period, which made them make sense to take out for some circumstances. Now, fixed rates dominate because the ARM rates aren't much lower than the fixed rates.
quitit 5y ago
I agree if one chooses to invest in riskier investments, but it's straight forward to invest in financial products that provide a rate that move in lock-step with home loan interest rates. These products are lower-earners, but there is limited exposure to risk.