Refinace Question

Home Personal Finance and Budgeting Refinace Question

  • Avatar sdbill 
    Status: Physician
    Posts: 12
    Joined: 03/30/2018

    Just as general question bc I am def a beginner investor.

    I understand the need to reduce/avoid debt, but (aside from the risk) what is the harm in keeping mortgage debt at 3.25%. Using the money not used to pay down the debt early to invest in index funds and or real estate?

    Granted one is a guaranteed debt (mortgage) but traditionally over the long haul (my retirement window is 20+) the market and real estate outperform 3.25%?

    Part of what is motivating us to invest before paying of more debt is to allow more time for the investments to grow before retirement.

    #243999 Reply
    Liked by Infinity, Zaphod
    Avatar Infinity 
    Status: Physician
    Posts: 91
    Joined: 05/25/2019

    You live in HCOL area and has higher debt/income or debt/asset ratio than most of us.

    Your debts are in primary home and student loan (not in cash flow producing assets).

    Your assets are not liquid: retirement funds and home equity.

    You may have to depend on both incomes to pay for loans and expenses.

    Can you live with one income?


    I am comfortable of taking 1.5M loan for real estate properties because I know that the mortgages can be paid by rental incomes (not my incomes).

    However, if something bad happens, I can pay the loan from my personal incomes or from selling stocks from taxable accounts.


    As long as you have a good back up plan, and comfortable with it, nothing wrong with your plan.

    Planning to invest in index funds is reasonable, but I would think twice before investing in real estate now unless it is your own office.

    #244028 Reply
    Avatar EntrepreneurMD 
    Status: Physician
    Posts: 323
    Joined: 06/10/2019

    Looks like the Cali folks like to (have to?) keep a disproportionately large amount of long term debt relative to income/assets, etc.

    My concern is purely regarding risk. You don’t have excessive debt relative to income or equity. But what if something happens to that income and/or equity?…

    What if one of you loses your job or the employer shuts down? What if (morbid thought) one of you passes away or becomes ill/disabled? What about an earthquake or Cali fire? – property insurers can and do severely lowball payouts. What if you no longer want to be forced to moonlight? What if this lofty market tanks or goes no where for a decade? What if you now have to pay for life insurance to protect the family from all the debt whereas you are essentially self insuring if yo pay off all the debt sooner? – the payment for that policy now eats away at your profits. What if your plan goes right and you become comfortable with accumulating even more debt – will it just continue to go well?

    What if none of this happens and your market returns outpace the interest on your debt long term? That can happen too. As long as you can tolerate better than I can all the what if’s regarding leverage.

    #244200 Reply
    Liked by Infinity

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