No. of Recommendations: 5
Lots of good comments here. But plenty of bad ones, too.

Here's mine:

* Your house is not an investment. You don't "earn" 4.75% (or whatever your interest rate is) by paying extra on the mortgage. Such claims are sheer innumeracy. Avoiding an expense is not the same thing as earning a profit.

* A paid-off house is not cost-free. You have an imputed (foregone) cost of whatever that amount of money would be earning if it was invested. In my case, I have a good chunk of money invested in a preferred stock portfolio yielding about 7.5%. $100,000 in this earns $7500 a year. Putting that $100K on the mortgage would cost $7500 a year in forgone income.

* If you are a novice newbie investor, you will probably make a LOT of mistakes and lose a good chunk of money while gaining experience.

* If you are going to pull money out of your house to invest, you should get the cheapest money you can for the longest time you can. This means a 30 yr mortgage, not a 15 year. And fixed, not adjustable. And 80% LTV. If you are going to do it, do it right, don't take half-measures.

* Oh yes, don't pay points to get a lower rate. If you don't understand why, then your financial knowledge is lacking.

* You MUST protect yourself financially. Unless you are an experienced investor, you should take something like half the money you pull out, or something like 4-5 years worth of payments, and put that into something reasonably safe & liquid. Perhaps bond funds like BND, IEF, SHY, etc.
Invest with the remaining money.

* As long as you protect yourself, this isn't a bad idea, IMHO. This is pretty much the way that I got started on my investing career.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.