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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 211984  
Subject: Re: OT: Interest rate on mortgage Date: 1/19/2013 10:26 AM
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As the others have said, the most prudent and conservative thing to
do is to pay down the mortgage.

If you want to be just a little aggressive, convert to a line of credit.
Pay it down as much as you can, same advice, but keep the borrowing power on standby.

If the S&P drops to some insanely low level like 500 later this decade,
then borrowing to invest might make lots of sense.
It will be hard to do badly with money deployed at wonderful prices.

Even so, make sure it's uncallable money.
Better to have a high rate fixed mortgage for a decade than to have
a low rate line of credit they can call on demand without notice.
First rule of leverage: If the loan can be called, the proceeds shouldn't be in stocks.
That rules out broker margin and all other demand loans.
(well, maybe first rule is "don't", but uncallability would be the
second rule for the people who refused to follow the first rule).

This is of course a wonderful case of "do as I say, not as I do".
I have a loan now against real estate with much of the proceeds in stock.
But it has a few positive aspects: It's uncallable for 10 years,
current interest rate 2.32%, prepayable, and it's denominated in euros.
With luck the euro will have another big fall and I can pay it off with
itsy bitsy banknotes covered with eensy teensy windows and bridges.

Jim
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