Author Topic: Refinance house, take equity, and put into vtsax?  (Read 1131 times)

Flyfish

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Refinance house, take equity, and put into vtsax?
« on: March 18, 2019, 08:14:34 PM »
Hey all,
I had a curious thought and was wondering if anyone has ever done this or has any input. Has anyone ever refinanced their home and put the equity into vanguard vtsax? Just curious as to if this can help accelerate early retirement.

matchewed

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Re: Refinance house, take equity, and put into vtsax?
« Reply #1 on: March 19, 2019, 08:16:06 AM »
There isn't enough information to know whether this makes sense or not. How much equity, what was your rate, what is the rate you'll refinance at, what are your closing costs...etc.

nereo

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Re: Refinance house, take equity, and put into vtsax?
« Reply #2 on: March 19, 2019, 09:12:53 AM »
Hey all,
I had a curious thought and was wondering if anyone has ever done this or has any input. Has anyone ever refinanced their home and put the equity into vanguard vtsax? Just curious as to if this can help accelerate early retirement.

We did something similar, but used the equity from our home sale to first max out all of our tax-advantaged accounts (following the Investment Order).  Lump-sum contributions into our IRAs was easy; for our HSA, 401(k) and 403(b) accounts we had to contact our HR and have them increase our biweekly contributions as much as our paychecks would allow. In the meantime we used cash-on-hand from the sale to live off, since our paychecks became very close to $0 while we were topping up our 401(k).  Since we had no taxable burden from the sale of our home we were able to reduce our taxable burden to 0 during that year while significantly boosting our tax-advantaged accounts. 

Whether this approach makes financial sense depends on your situation, goals, taxable burden and available tax-advantaged accounts.

RyanAtTanagra

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Re: Refinance house, take equity, and put into vtsax?
« Reply #3 on: March 19, 2019, 03:23:05 PM »
Anyone who's in the 'don't pay off your mortgage' camp should also be on board with this, imo.  It's the same thing.  But you do have to ask yourself the same questions you would when buying the house.  Is having that much debt appropriate for your income/net worth levels?

BlueHouse

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Re: Refinance house, take equity, and put into vtsax?
« Reply #4 on: March 21, 2019, 02:21:10 PM »
Anyone who's in the 'don't pay off your mortgage' camp should also be on board with this, imo.  It's the same thing.  But you do have to ask yourself the same questions you would when buying the house.  Is having that much debt appropriate for your income/net worth levels?
+1.
I'm much too risk-averse to do anything like this.  I also like the idea that my mortgage gets paid down over time, my investments get added to over time.  Anytime I end up with a big chunk of money in my pocket, I get very neurotic about whether or not I'll make the right choice, and then usually end up doing nothing (which is usually the wrong choice!)

Just remember that the people that got into trouble and lost their homes during the financial crisis were often the ones who had taken cash-out refis.