I currently have a $1.7M mortgage on my California home. It was last refinanced in 2021 into a 5/1 ARM with a very low interest rate. However, in about two years in 2026 the rate would be reset and I expect it to become much higher.
I have a substantial amount of money in T-bills and short-term treasuries that I can use to pay down the principal . Since I'm in the top tax bracket (around 50% federal and state combined), I'm thinking of paying down to whatever that tax deduction limit is ($1M or $1.1M). By doing so I would essentially replace my current risk-free investments with another risk-free investment equivalent which has a higher return.
So I wonder how I should actually execute this plan. Ideally I want my principal to stay at $1M or $1.1M forever since the effective interest rate after tax deduction would still be very attractive. I guess refinancing into an interest-only loan would be an option if it's available with a competitive rate. If I simply make a lump-sum principal payment to my current loan, my understanding is that it would reduce my principal balance and shorten the loan's term but the monthly payment will be unchanged. Is that correct?
I have a substantial amount of money in T-bills and short-term treasuries that I can use to pay down the principal . Since I'm in the top tax bracket (around 50% federal and state combined), I'm thinking of paying down to whatever that tax deduction limit is ($1M or $1.1M). By doing so I would essentially replace my current risk-free investments with another risk-free investment equivalent which has a higher return.
So I wonder how I should actually execute this plan. Ideally I want my principal to stay at $1M or $1.1M forever since the effective interest rate after tax deduction would still be very attractive. I guess refinancing into an interest-only loan would be an option if it's available with a competitive rate. If I simply make a lump-sum principal payment to my current loan, my understanding is that it would reduce my principal balance and shorten the loan's term but the monthly payment will be unchanged. Is that correct?
Statistics: Posted by BHFTW — Sun Aug 04, 2024 12:19 am — Replies 1 — Views 186