Debt: - 6k of student loan debt, composed by many small loans with rates between 3.5% and 4.1% - Mortgage: 7/1 ARM 3.5% 735K (home value $920) Portfolio -$130k in stocks -$150k 401k -$30k cash Considering selling some stock to pay off more agressively so I pay less interest. Does that make sense? What percentage makes sense to keep invested?
I’m sure there might be some dissent but historically the market is easily going to outperform your 4% interest rates. If the loan payments are manageable on your salary then I’d personally keep the stocks working. And don’t even think of touching that 401k to do this. Pay yourself first. I’ve paid off my 3.875% home loan but that was recently and only after I felt I had enough liquid that being debt free was worth it.
I would suggest you to first refinance to 30 year fixed. And, if you are initial stage of mortgage where interest >>> principal, then it may sense to pay down.
He/she already has a good interest rate. 30 year fixed would be higher.
It is a good point. An ARM can be risky but those home prices in CA make getting a traditional loan and 20% down rough. What are the max rates the ARM can get to? I don’t see our interest rates climbing to sky high numbers but they were 6-8% back in 2007. 7 years and you have to refinance. What will the rates be then? It should be part of the plan to refinance in the next five years.
I wouldn’t pay off the mortgage. The student loan is a bit different. It’s incredibly satisfying to payoff any loan when 6k is all that’s left especially the student loan for some reason. I rode on scholarships and worked coding jobs to never had to borrow for study mysslf, but I paid them for dependents.
Statistically speaking, stocks makes sense but with a good risk considering the present situations. Principally speaking, the rule is to reduce debt first and again considering present situations it makes more sense. I liquidated some of my RSUs to buy home ($400K) all cash 3 months back. Living in a debt free home is qualitatively better and it cannot be quantified.
Agree. That’s what I thought until I saw 2.75% loans being closed. Now I am all for 15% down and as big as a jumbo loan as I can get. Close my eyes and push all my chips on red. YOLO!
I’d never sell stock to buy a house unless that was the plan to start with. It’s a very risk plan though. If you plan on fixed spending it’s safer to collect in fixed income funds
TC?
Sell the long term ones so you pay less taxes. It's always good to get rid of debt, but you need to prioritize which debt to pay off first!
Debt is good
Why don’t you refinance your mortgage? I would think you could get a sub 3% arm if you have good credit.
1) Payoff student loans out of cash 2) Build up cash to 6 months of spending (6x monthly spend) 3) Then start chipping away at the mortgage. Note ) house in the valley and working in tech is heavy concentration in one sector as the housing market and tech are closely correlated. Awesome when things are on the up terrible when the ass falls out of tech
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Probably not.. historically stocks have earned more than your yearly interest rates. With that being said of course if we were a month away from a recession I'd tell you yes sell and pay off your mortgage or loans. You can think of paying down your mortgage as putting money in a savings acct with 3.5% (which doesn't really exist) but you get the point :) paying down the mortgage has no risk but less reward than tskinn the risk with stock and earning more than 3.5%
You can’t time the market. At a young age keeping the money working is historically the best bet.