Doing some financial rebalancing and you could help me out Currently have a car loan at $25k at 6.5% interest Currently have a house mortgage at 3.125% interest, pmi per year is like $1k. If I want to pay more principal to remove pmi itd be around $50k Have $80k vested stock from espp/rsu, does it make sense to sell vested stock to knock out house pmi and/or car loan? Edit: making it clear that my pmi is 1k per YEAR (calculated) not per month TC: 255
With inflation the way it is, I will pay off every loan under 10% as slowly as humanly possible
That’s the exact opposite of what you should do. Inflation is good for debtors, especially on fixed APRs.
Shouldn't it be the other way around? Your cash will bring in more money via interest in HYSA and hence will outperform loans
Keep espp / rebalance
There is more to consider than just payoffs. Are your gains from selling stock short term or long term that has a big tax implication. I would ensure they are long term to save on tax. Does selling stock push you in a higher tax bracket, something to factor in. PMI is something you want to avoid first ideally because it is a hard cost. You are just losing 1k every month full stop. You can also strike a balance when it comes to EMI. Many folks don’t realise that making their payments larger can save them a lot of money. If you have a 30 yr loan but pay the EMI of 15yrs monthly your payment will only go up roughly 50% (instead of 100%) but the savings on your interest is close to (100%) I.e you save half of what you would have paid over 30 yr period. Here is a comparison. Having said that if your interest rates are very low you may get a better return by keeping that money in the bank given market volatility. A lot of banks are giving more than 4% currently so you would actually be on a positive side if you just invest correctly the excess. I personally don’t like debt and try to get rid of it asap but you need to do that math. So keep this in mind and strike a balance as it best fits your financial situation
My pmi is 1k per YEAR not per month
That’s noting then. I presume you have MICROSOFT STOCK. The virtual returns although not guaranteed by keeping your stock may be much better then selling and paying off, because it’s one company whose stock is doing fairly well. So you need to consider year on year return on stock as well vs the savings.
Might be worth getting an appraisal if you're close to hitting the 20% equity mark
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Keep the 80k for emergencies, the debt isn’t that bad in your case.
Have about 30k cash for emergency. Not enough?
Msft stock has good potential with ai why sell to pay down low interest debt, seems like bad trade if you have good cash flow. But let’s see what others think