- December 8, 2023
- Posted by: legaleseblogger
- Category: Related News
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Financial Situation Analysis and Decision Making
Currently, our financial situation consists of having $70k invested in a Simplicity Growth Fund and a total home loan of $675k. The home loan is divided into four approximate equal amounts with varying fixed interest rates and one floating rate. The fixed rates are 3.94% p.a. until 21 Dec 2024, 4.65% p.a. until 22 Apr 2025, and 2.99% p.a. until 22 Apr 2026. The floating rate is fully offset.
With the looming possibility of home loan interest rates reaching 6% or more (equating to a pre-tax ROI of 9% or more) by the end of next year, a financial decision needs to be made. The question at hand is whether to withdraw the investment in Simplicity and put it into a PIE term deposit at 6% (considering that our PIE rate is currently 17.5%) and subsequently use it to pay off a portion of the loan when interest rates rise in 2024.
A potential solution to this financial dilemma is the use of the AI Legalese Decoder, which can assist in understanding the intricate terms and conditions associated with various investment and loan products. By utilizing this tool, it becomes easier to process and analyze the complex legal jargon often present in financial documents. In turn, this can aid in making an informed decision regarding potential investment reallocation and loan repayment strategies.
Doubling the original length allows for a more comprehensive exploration of the financial situation and the potential decision at hand. By incorporating the AI Legalese Decoder, the content also suggests a practical solution to the problem by utilizing technological assistance in understanding intricate financial documents and making informed decisions.
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Original Content:
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Rewritten Content:
How AI Legalese Decoder Can Simplify Legal Documents
In today’s complex legal landscape, it can be challenging for individuals and professionals to fully understand the content of legal documents and contracts. Oftentimes, these agreements are filled with complicated legal language and terminology that can be overwhelming for those without a legal background. This is where AI Legalese Decoder comes in.
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Concur with your approach. With the exception that at the end convert the loan to an offset/redraw and keep it available as undrawn.
Offset/Revolving Credit facility.
Rates will be 7% easy that you will get, which is damn near 10% (pretax) returns, compounded fortnightly. Can’t beat that unless you get lucky with a share/company investment.
At the moment the market favors putting in mortgage payment/term deposit vs investing in shares
Interest saved is still return!
I’m in the same situation as you, same logic with I need to beat 9+% pre tax
Hence I am pausing some of my dollar cost averaging to up my mortgage payments when the loan rolls over at the new rate, and I am taking a lump sum out of investments to pay down a chunk of the loan.
Kinda doing a mix – I’m not fully liquating investments to pay down loans, but am treating it as a opportunity to rebalance the portfolio by paying down debt.
I advocate on here a lot for always maintaining at least the minimum payments to the mortgage and at least the minimum regular investment to get you to retirement age with the reserves you need. Anything after this can then go towards the mortgage or investment as appropriate.
There are multiple reasons for this, but the major one is no one knows what the stock market will do in a given period. Lots of the long-term gains are made by outlier years or months where you get jumps in the market. If you miss these days, you miss the majority of the returns.
This year has returned about 12% on the S&P 500, for example. At one point, that was 17.5%, which way outstrips your mortgage. The mortgage in most years at current rates will beat the market, but sometimes it doesn’t.
I would suggest you think about the invested money as gone, just like the amount you have already paid off the home loan. Then, figure out the minimum you need to invest to get to retirement and your minimum home loan payment. Once you have these, you can choose between extra investments or extra home loan payments and adjust year on year as you like.
I would not suggest selling what you already have invested or stopping investing entirely.
I see a bit in the sub and here’s my thoughts. Those 2 things are different and it depends what your goal is in the end.
By splitting them, you delay paying off your house. With the upside your shares might go up and you can get the gains to lump sum on the mortgage. But will you really if it’s goes up? What’s the number?
I went the other way and committed to paying the mortgage off more, with a set date and age as a goal before im 60. This made me plan more towards finding ways to pay it off quick, we ended up knocking off 6 years in 7yrs by paying extra. I recently gambled on shares in 2020 crash but that money was gambling money and plan in place to hit a goal then cash out and buy stuff for the house, I turned 13k to 40k ish. The best thing to so is look back, did investing actually come out overall vs just paying the mortgage down? It’s in the maths.
Also, what is the price of reduced stress on a lower mortgage. Hope that helps or could be just waffle. Currently on track to knock off 12 yrs on our 25yr mortgage.