Author Topic: How to sell stock to payoff mortgage  (Read 466 times)

aak

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How to sell stock to payoff mortgage
« on: February 01, 2021, 02:02:43 PM »
Hello community!

We're about 2-3 years away from our FIRE date and have decided to not hold a mortgage afterward. We hold shares in two tech stocks that we would like to sell to payoff our mortgage early - in addition to getting rid of the mortgage this would help diversify our portfolio. Selling the shares while we are still working would come with a capital gains hit. If instead we waited until after we stopped working, we could sell the shares over several years and pay off our mortgage with minimal tax, but more portfolio risk due to less diversification.

My question is if there are best ways to do this, or if it is just matter of personal risk tolerance/preference. If it's the latter I'd be interested in hearing what others have done and *why* as that would help me get started in how to think about this situation for ourselves.

Thanks!


RWD

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Re: How to sell stock to payoff mortgage
« Reply #1 on: February 01, 2021, 03:18:43 PM »
I'm not sure I understand how concentrating all the money in your house is increasing diversification...

secondcor521

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Re: How to sell stock to payoff mortgage
« Reply #2 on: February 01, 2021, 07:10:48 PM »
Most people I've seen in this situation seem to fall somewhere between "not doing it all in one year holy cow the taxes!" and "probably want to get it done in less than a decade let's just git 'er done".

It probably depends on your tolerance and capacity for risk, the volatility and risk in your tech stocks, how concentrated you are in those two stocks relative to your overall portfolio, your relative tax rates now and after you stop working, how big of a mortgage you have, whether the mortgage is fixed or variable, how many years left you have on the mortgage, and probably other things I'm forgetting about.

There's probably no optimal answer, especially not one determinable in advance.  I'd probably pick a tax bracket that you're comfortable staying within that would get the job done in a time frame that seems acceptable to you.  Maybe start with how long it would take you to pay it off if you stayed within the 0% or 15% LTCG bracket, and see if that's too long.  If it's too long, then maybe add a year or two up front of going higher.

If a large number of the shares are short term (unlikely but possible), then of course look at the ordinary income tax brackets that would apply.

At those levels, you'll also want to look at and consider the impact of NIIT and AMT if either apply to you.

Dicey

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Re: How to sell stock to payoff mortgage
« Reply #3 on: February 02, 2021, 12:37:08 AM »
If you want to read other's stories or ask more questions, everyone's welcome over at the DPOYM thread.

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/