| CD rate as same as Mortgage rate- Save or payoff |
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foodeefish
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Cash: $ 5.50
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Joined: 07 Feb 2004
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| CD rate as same as Mortgage rate- Save or payoff |
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My ten year Mortgage loan ( 8 years left) has an interest rate of 4.50% .I now have $100,000 that I am thinking of putting in ten $10,000 CDs that return 4.50%. I figured I purchase a $10,000 CD every month for ten months in order to be able to get at some of the funds if necessary.
Am I better off paying on the mortgage ( still have ($142,000 to pay on the mortgage)  or keeping the monies somewhat liquid and place the money in CDs?
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Mon Dec 12, 2005 8:26 pm |
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clint48
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I would think you would be better off putting your money in the CD's. I am assuming you are concerned about safety. If you wanted to take a little more risk though I am sure you could find a more profitable investment.
Clint
Short Report...You Need To Make Some Money!
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Wed Dec 14, 2005 11:04 pm |
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Fern
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If peace of mind and the ability to sleep well at night is very important to you, then pay off the mortgage (my preference).
However, most people would advise against this since by doing so you lose the tax deductiblity of mortgage interest payments.
Also, by laddering the CDs as you plan to, you retain the opportunity to earn more than 4.5% if interest rates rise.
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Fri Mar 17, 2006 7:50 pm |
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efflandt
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Location: Elgin, IL USA
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Something to note is that paying down principal does not get you out of making scheduled payments, it just ends the loan in fewer payments. So keeping some cash in an emergency fund is a good idea (especially if interest paid and interest earned is the same).
Assuming mortgage interest is deductable, that just offsets the tax on the CD's, so you are not gaining or losing anything by keeping some or all in the CD's (which may return more if/when interest rates rise).
However, if you held stock that grew more than 4.5% annually (held for more than a year) by itself or along with dividends, it may be taxed at lower long term capital gains rate. "Qualified" dividends are taxed at long term rate. So you could average 10% more or less return at a lower tax rate. But the risk depends whether you know what you are doing and how the markets go.
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Sat Mar 18, 2006 3:40 am |
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