OT - Money / Investing Thread (aka financial no stupid questions)

[847badgerfan]

If your ROI is roughly 3 points higher than your interest rate, investment makes sense.

You also need to factor in PMI if you're not putting at least 20 percent down.

[FearlessF]

yup, I'll allow my advisor explain it to me, show me the numbers, and steer me in the right direction

that's why I pay him

[MikeDeTiger]

If your ROI is roughly 3 points higher than your interest rate, investment makes sense.

You also need to factor in PMI if you're not putting at least 20 percent down.

Yes.

Also might consider if there's an employer who contributes to a 401k match.  And if you can reasonably project if you'll likely stay in this house or will be moving (selling and buying again) in the future.  Several things could be considered to fine-tune a decision like that, but I think @847badgerfan pegged the main one.  

[bayareabadger]

I think this is what you're seeking (calculator)

https://www.westernsouthern.com/personal-finance/pay-off-debt-or-invest-calculator

Yes. Yes it is!

[bayareabadger]

If your ROI is roughly 3 points higher than your interest rate, investment makes sense.

You also need to factor in PMI if you're not putting at least 20 percent down.

Hmm, so right now I’d need 9-plus percent across a long haul. Or to hope I’d be able to refinance down a few points in the coming years.

Well that’s good to know. 

[betarhoalphadelta]

Hmm, so right now I’d need 9-plus percent across a long haul. Or to hope I’d be able to refinance down a few points in the coming years.

Well that’s good to know.

Yeah, over the past couple of decades, it's been a pretty wide spread in favor of investing. But not at the moment.

S&P 500 has returned on average a little over 10% long term, and around 7% after inflation. So it's better to invest up until that 7% interest rate. But what I'm hearing is that rates are a little over 6% now, so it's close. 

But the possibility to refinance down is helpful. And the fact that the mortgage interest is deductible is helpful. For optionality's sake I'd say put down enough to avoid PMI and keep the rest invested. You have more liquidity options that way--at least as long as the market doesn't nose-dive!

[bayareabadger]

Yeah, over the past couple of decades, it's been a pretty wide spread in favor of investing. But not at the moment.

S&P 500 has returned on average a little over 10% long term, and around 7% after inflation. So it's better to invest up until that 7% interest rate. But what I'm hearing is that rates are a little over 6% now, so it's close.

But the possibility to refinance down is helpful. And the fact that the mortgage interest is deductible is helpful. For optionality's sake I'd say put down enough to avoid PMI and keep the rest invested. You have more liquidity options that way--at least as long as the market doesn't nose-dive!

That’s probably what it ends up being. And I’m sure when we get deeper into the process whoever we work with will have some guidance. 

All in all, a good place to be. 

[847badgerfan]

There is nothing structural or fundamental at this point that would cause a market nosedive.

The choppiness we are seeing in the markets is mostly based on emotions.