- April 17, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Financial Situation and Investments Overview
Currently, I am approximately halfway through paying off my mortgage, with a remaining balance of $150,000 at an annual percentage yield (APY) of 2.85%. In addition to my mortgage, I have investments with fidelity, with the safest option being to invest around $2,000 per month in Certificates of Deposit (CDs) that typically offer a 5% return for a duration of 6-12 months.
## Consideration for Guaranteed Investments vs Mortgage Payment
My strategy is to prioritize guaranteed investments through CDs over making additional payments towards my mortgage. This approach allows me to secure a fixed return on my investments rather than potentially higher but variable returns by putting the money towards the mortgage. I am seeking advice on whether this strategy aligns with my financial goals.
## Additional Investment and Retirement Accounts
In addition to my mortgage and fidelity investments, I contribute 8% of my income to a 401k with an employer match. I also maximize my contributions to a Health Savings Account (HSA) with auto-investment features. Furthermore, I regularly invest around $200 in the SPY exchange-traded fund (ETF) through a recurring investment plan.
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****** just grabbed a
2.85 is like free money.
2.85% is a steal, putting that money into HYSA, Bonds, CDs, or stocks should all make more than the interest on the loan
Cd for sure or high yield savings account
If the CD’s rate x (1 – your tax rate) is greater than your mortgage rate then it makes financial sense. That said, my father in law espouses the mental benefits and freedom of having their house paid off.
I’d recommend checking out t bills. I’ve found the yields are on par with CDs and you don’t have to pay state income taxes on the interest (~6% for me).
If you have a brokerage account you might consider T-Bills, a Treasury focused ETF or a Money Market Mutual fund that focuses on Treasuries. They would be more liquid than CDs and can be state tax free.
[CD Ladders](https://www.reddit.com/r/Bogleheads/s/YT9IzrvYlp)
CDs while you are at it, HYSA around 4% if you may need those money, and as time goes, if CDs and HYSA all start falls below 3.5%, and assuming you already have lump sum of cash saved from CDs and/or HYSA, you can recast your mortgage if it’s not FHA
Well there is no reason to pay extra on that mortgage. I would invest that money not put it in a savings vehicle like CDs.
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When people say to take the higher interest, it assumes you have a liquid sum you could pay off the house in full. Since this isn’t you, you need to run the numbers for both long term and then add in some personal factor of having the mortgage paid off.
Paying down your mortgage is also a guaranteed return.
> my thinking is to have a guaranteed investment here versus putting the money towards my mortgage, any thoughts?
After inflation and taxes, a 5% CD is basically just treading water though certainly you are arbitraging vs your mortgage.
I wouldn’t pay off a 2.85% mortgage any faster than I had to but I also wouldn’t keep a huge amount of money in HYSA or CD.
My God do not pay that loan off early. You could take the money and put it into SCHD, Schwab high yield dividend fund. Pays 3.5% yield and has a pretty decent growth track on the yield. Obviously there are better investments out there. But there are HYSA out there that are paying 5%.
HYSA. Close to double the interest and more liquid.