Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (83871)	3/22/2001 1:59:56 AM
From: Simba	Read Replies (1) \| Respond to of 436258

JoanP: If you can get 6.5% before tax on a competing investment it does not help in paying off the 6.5% mortgage. This assumes your tax bracket is not heavily influenced by the mortgage interest deduction. There are other things to consider too: 1. Liquidity in owning cash or similar instruments. If you paid off the loan your cash is locked into the house and you may need to refi or take a loan to unlock the equity at a future date if you badly need the cash. This will involve fees and could be at a higher interest. 2. Also the asset could go down in value if the real estate market plunges. Then you are stuck holding a depreciated asset that you may not be able to get cash out of at a future date. This is a lower probability scenario. 3. If you took a large equity stake in the house by prepayin, you also need to worry if you can keep your job to pay off the remaining loan amount. In case you lose your job and do not have cash to continue the remaining payments the bank may foreclose and they are NOT OBLIGATED TO RETURN YOUR FULL EQUITY. HOMESTEAD LAWS ONLY HELP YOU GET BACK A SMALL PORTION OF YOUR LOCKED IN EQUITY. If you had low equity you can walk away as if you were a renter. This may seem trivial, but I was talking with a mortgage guy about refi a few days back and he said he knows of cases where people with more than 50% equity in the home foreclosed their home and got just the Homestead law allowed amount. Simba