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You have a rather sophisticated analysis here, yet, you left out the most important factor: risk. Something that every sophisticated investor must take into acc
by jjeaff 5y ago
You have a rather sophisticated analysis here, yet, you left out the most important factor: risk. Something that every sophisticated investor must take into account. And in the case of your personal residence, you have to take into account not only investment risk, market risk and interest rate risk (which you alluded to re: refinancing, but you left out the fact that you are not guaranteed to be able to refinance and even when you do, there are fees associated), but you also have the risk of losing your home and being homeless. For many people, the latter risk is assigned a very high rate, so I don't think it is as simple (or complicated) as you make it out to be.
- vinceguidry 5y agoIf they're banking cash they would have otherwise put into their mortgage, then that extra liquidity is going to be a good thing should it come to foreclosure.
- jjeaff 5y agoIf you are banking the cash, rather than investing it, then the whole plan goes out the window because your cash is losing value while you also pay interest. You can buy Series I bonds as was mentioned but those are variable interest and have only been worth buying the last year or so. They have been low interest for the last 30 plus years. Also, you can only buy up to $10k in series I bonds per year.