Amazonimaven

Would you sell your RSUs to pay off your house?

Suppose you have 150K in vested AMZN RSUs and your remaining mortgage (4% interest) was 150K. Would you sell to pay off or hold for a longer term in case the stock goes up significantly more? (Assume no taxes on the RSU sale) Please explain your reasoning in comments

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OpenDoor MhBB55 Mar 24, 2019

Depends on other finances of course. But most likely pay off mortgage, because can you imagine not having a mortgage/rent payment? 🎉

Facebook public2 Mar 24, 2019

Paying off your mortgage will give you a ~4% return? If you think stock can outperform 4% over the life of the loan (very likely) hold stock.

Capital One EXwk33 Mar 24, 2019

Also depends on your risk tolerance. 4% is guaranteed. The stock performance will likely be higher but has more uncertainty and is highly correlated with your employment (if a bad recession comes or Amazon stumbles stock will be hit as they layoff a bunch of people)

Facebook public2 Mar 24, 2019

Sure, that's why you should have an emergency fund so you are not at risk if the market falls or you lose your job. If you are super risk adverse just up the time from 6 months to 2 years or whatever makes you sleep better. Chances are this is still lower than 30 years.

Microsoft Brazuka Mar 24, 2019

Neither. Keep mortgage and sell RSU. Then diversify by buying index ETF or a dozen stocks ( not Amazon) you have confidence in.

Cadence luna. Mar 24, 2019

This

Amazon QTDv24 Mar 24, 2019

This

MathWorks p8Rz2u Mar 24, 2019

Would you take out a loan with an interest rate of 4% to buy 150k in Amazon stocks right now?

Google uzaname Mar 24, 2019

I see this argument a lot bit it does not take into account decrease in marginal utility

Amazon KULL00 Mar 24, 2019

Say more

Apple 867530nine Mar 24, 2019

Depends on where you are in your amortization schedule. If you’re still in the early curve, pay it off. If you’re late in the curve, it’s mostly principal you’re paying and stocks can outperform your interest rate. Finally remember that mortgage interest is tax deductible. Best to diversify.

Microsoft Brazuka Mar 24, 2019

Lol, this made no sense. The interest rate is applied to the outstanding balance, it doesn't matter if it's principal or accrued interest

Amazon imaven OP Mar 24, 2019

The interested is heaviest at the beginning of the mortgage

Netflix beebox Mar 24, 2019

I’d sell a portion instead of all of my stocks. One key to investing is never go to one extreme.

Nutanix hmbsjc1 Mar 24, 2019

Ultimately it seems to be an emotional issue. I’d pay off the mortgage without giving it much thought.

Amazon OVMT63 Mar 24, 2019

Being debt free is an incredible freedom. Maybe you will come out ahead in theory by keeping the stocks but it's easier to get to the point where you cease worrying about financial stuff when all your debts are gone. With no debt if you get into a tough spot it's easier to scale down your spending to fit your budget, but when your have a $5000/m mortgage payment even if on paper you are coming out ahead you can only cut you expenses so far.

Facebook public2 Mar 24, 2019

Compounding interest and tax breaks are not "theory" ;)

Amazon OVMT63 Mar 24, 2019

Repaying debt also compounds tax free

Intel yhgth Mar 24, 2019

The worst part of paying off your mortgage: realizing you still have to pay rent (property tax) to the government.

Groupon sleepy Mar 24, 2019

4 percent interest is head heavy, I.e. more interest frontloaded. So, first compute your effective interest rate at this point.