Comments on: Borrowing to invest is expensive http://monevator.com/2009/09/01/borrowing-to-invest-is-expensive/ Make more money, invest profitably, retire early Fri, 10 Feb 2012 22:06:19 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: George http://monevator.com/2009/09/01/borrowing-to-invest-is-expensive/comment-page-1/#comment-30988 George Sun, 11 Apr 2010 16:49:53 +0000 http://monevator.com/?p=2514#comment-30988 If you have a mortgage and you are also investing, then you are borrowing to invest. Thus it is in your best interest to ensure your investment returns significantly outperform the mortgage costs. Realizing this, one could (in the USA) currently refinance using a 10/1 ARM to get the best rate, often in the 3.85% range and then invest in bond funds returning 6.5% or higher. For myself, I know that means I'll be able to pay off the house in 5 years instead of 7 years with the previous 4.85% 15-yr fixed mortgage and savings rate. My risk has decreased because of the available cashflow (30% reduction in mortgage payment + cash out = available investment reserve went from 3 months of expenses to 18 months of expenses). If you have a mortgage and you are also investing, then you are borrowing to invest. Thus it is in your best interest to ensure your investment returns significantly outperform the mortgage costs.

Realizing this, one could (in the USA) currently refinance using a 10/1 ARM to get the best rate, often in the 3.85% range and then invest in bond funds returning 6.5% or higher.

For myself, I know that means I’ll be able to pay off the house in 5 years instead of 7 years with the previous 4.85% 15-yr fixed mortgage and savings rate.

My risk has decreased because of the available cashflow (30% reduction in mortgage payment + cash out = available investment reserve went from 3 months of expenses to 18 months of expenses).

]]> By: James http://monevator.com/2009/09/01/borrowing-to-invest-is-expensive/comment-page-1/#comment-20558 James Tue, 05 Jan 2010 15:10:35 +0000 http://monevator.com/?p=2514#comment-20558 I strongly only borrowing to invest if you have already decided your investment and you are only looking to borrow if the possible returns greatly outweigh the initial investment. I strongly only borrowing to invest if you have already decided your investment and you are only looking to borrow if the possible returns greatly outweigh the initial investment.

]]> By: “First Week Without Pilgrim Jr. “Edition of Weekend Links http://monevator.com/2009/09/01/borrowing-to-invest-is-expensive/comment-page-1/#comment-9762 “First Week Without Pilgrim Jr. “Edition of Weekend Links Fri, 04 Sep 2009 20:03:03 +0000 http://monevator.com/?p=2514#comment-9762 [...] explains why borrowing to invest is expensive. This was a close second to Matt’s [...] [...] explains why borrowing to invest is expensive. This was a close second to Matt’s [...]

]]> By: Neal@wealthpilgrim.com http://monevator.com/2009/09/01/borrowing-to-invest-is-expensive/comment-page-1/#comment-9759 Neal@wealthpilgrim.com Fri, 04 Sep 2009 18:40:25 +0000 http://monevator.com/?p=2514#comment-9759 So important...yet when someone is convinced that borrowing to invest is the thing to do, all the logic in the world usually doesn't deter them. Debt is a certain cost. Returns are projected. That equals risk. We can't ignore that risk...or when we do, we get into trouble. Thanks, So important…yet when someone is convinced that borrowing to invest is the thing to do, all the logic in the world usually doesn’t deter them.

Debt is a certain cost. Returns are projected. That equals risk. We can’t ignore that risk…or when we do, we get into trouble.

Thanks,

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