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Interest Rates, Cash and Equity in Real Assets

Having established that we want Lyonvest to maintain a large cash position, I thought it might be wise to look at my personal financial plan, too. In particular, how much equity should I have in my real assets? Specifically, should I consider a cash-out re-fi on my home?

Following is an example:

The current value of the house is $320,000. The outstanding mortgage amount is about $130,000. The current interest rate is 7.125%. That makes the monthly principal and interest payment about $871 (plus taxes and insurance.)

If I were to re-finance at an interest rate of 6.25%, I could keep my montly payment the same and have an extra $12,140 cash-in-hand (less any settlement costs.)

Another way to go, would be to borrow more money and invest the difference. The interest and/or dividends would more than make-up for my higher mortgage payment, there would be a greater tax savings, and there would be a greater likelihood of capital appreciation.

Sounds like a *no brainer* to me.


Mortgage Re-fi Resources

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