HousingFeb 21, 2020
PayPalaHkv78

Sell stocks to lower mortagage pymt?

Is it a good ideal to sell stocks, pay off towards principal and refinance my mortagage, so that my monthly payments will become lower? or pay interest and wait for stocks to grow?

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Twilio p@$$w0rd. Feb 21, 2020

🍿

Amazon allgdman Feb 21, 2020

Depends. ? How much interest you are saving , e.g 100K vs 500K etc , and how much stocks you are selling - Income tax you need to pay - potential stock appreciation! It’s not as black and white , you need to analyze it properly !!

PayPal aHkv78 OP Feb 21, 2020

Sell around 100k so that I will save $800/mnth on interest. Always end up like not having cash and have to wait for next paycheck. What if stock doesn’t appreciate?

eBay V_Vendetta Feb 21, 2020

If stock keep going up it’s a bad decision to keep stocks. If there’s a recession you better sell them to cover the mortgage. Given the uncertainty you want to keep a balance, if you have lots of stocks and a large mortgage you might want to sell some to reduce some of the mortgage

eBay gaaji Feb 21, 2020

Well said Mr. Balanced mindset

eBay V_Vendetta Feb 21, 2020

Well you could also use a “go big or go home approach” in which case I would suggest sell all stocks to buy put options on Tesla and increase mortgage to buy bitcoins but OP isn’t asking how he can try to become a multi millionaire/homeless in the next few years. That’s why a balanced approach fits his needs

Sage vIJH82 Feb 21, 2020

In general it's not a good idea. Mortgage rates are low and historically stock market is more than 2x the rate.

PayPal aHkv78 OP Feb 21, 2020

What if market drops? All I have is stocks and hoping it to get appreciated

Sage vIJH82 Feb 21, 2020

Are these company stocks for where you work? I would treat those like normal income since it wasn't really a voluntary investment. This applies to any financial decision from paying down mortgage to money for prostitutes.

Amazon Slavs Feb 21, 2020

It’s a math problem with a few variables. Open Excel and calculate different scenarios (given variable stock performance, real estate market change, unexpected events such as unemployment).

PayPal aHkv78 OP Feb 21, 2020

I agree, want to get various thoughts to make a right decision

Oracle iOFR21 Feb 21, 2020

Where else do you get money at ~3% interest?

Oracle Xyzzyxyzzy Feb 21, 2020

How about donon little spurts

Oracle Xyzzyxyzzy Feb 21, 2020

Sell some every quarter and dump in mortgage till it comes to your desired level. Refinance if you could to bring down the rate.

Merrill Lynch MoPi11 Feb 21, 2020

Diversify the position if it’s concentrated in one stock then refi into a 15 or 30 yr fixed. With good credit you should get 3.5% or better. Even if you just invest in the S&P 500 you would be looking at a return of 7-8% on avg which would net you a 3.5-4.5% return by putting the cash to work instead of paying down debt. Also, if this is for your primary you can deduct the interest rate on your mortgage which can be good from a tax perspective.

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pkCL18 Feb 21, 2020

You can think of your mortgage as borrowing margin for your risk assets that you own. Your portfolio consists of a house and some stocks. If you believe the assets will appreciate at a rate greater than the interest rate on the loan, then keep participating in capitalism by being capitalized by your mortgage lender. Otherwise pay off your mortgage. TLDR if your mortgage is 5% but you think your stocks will make >5% risk adjusted, keep stocks, else sell stocks to pay off mortgage

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fghi123 Feb 21, 2020

I disagree with this analysis. Mortgage interest rate is not comparable to the investment gain percentage. Mortgage balance is usually so much higher than the amount used for downpayment. Let's say OP's mortgage balance is 600k. An intetest rate of say 4% is 24k of interest per year. If OP's 100k is all in stocks, they have to appreciate 24% to make 24k, and that does not even include the tax.

eBay gaaji Feb 22, 2020

But then the returns are inverted right. There will be a point where the interest paid will become lower while the stock appreciation will be a lot higher. It's definitely a patience game