Hello all,
Here is my quandary:
House Value: ~$380,000
Mortgage $66,500 remaining at 2.99% (payments are maxed up to double payments a week, and there is just under 9 years remaining, if I don't make any lump sum payments). I can make $17,800 a year (November 2012 to November 2013) in additional lump sum payments (haven't made any this year).
I have a mutual fund worth ~$67,000 earning shitty returns (3% average over the last 2 years) at the moment. I borrowed $65,000 to buy that investment from my HELOC, and I'm paying 3.5% interest to furnish that debt. However, this debt is tax deductible in it's entirety, and my marginal tax rate is 32%, average tax is 24%
I have an RRSP account with $33,000 in it, earning similar 3% returns on average, over the last 2 years. (I put ~$5500/year in historically).
Say I have $40,000 cash, where would you put it? I only have about $15,000 room in my RRSP, and I can only make a max lump sum payment of $17,800 per year on the mortgage.
I am about to take 6 months off work next year to recover from hand surgery (boo) so I may need access to some of that, but I can take it out of my HELOC if required. The HELOC is tied to the mortgage, so as I pay down the mortgage, the amount I can borrow from the HELOC increases (I have $45,000 available credit in the HELOC, and I don't imagine I'll need anywhere near that for the 6 months off).
I own a small consulting business which grossed ~$170,000 last year. After taxes and business expenses, I personally netted about $120,000. This next year is going to be half of that, but I will still easily make enough to cover my normal expenses and prepayments.
Where would you put it? How would you split it up?
I'm not ready to give up on the investments, and sell them to pay off what I borrowed.
Despite the fact that the interest rate is lower on the mortgage, I'm inclined to put my $$$ there, since I can re-borrow from the HELOC if needed. If I pay down some of the borrowed $$$, and then need to take it back out again, it won't be tax deductible anymore either.
I'm inclined to pay the $17,800 on the mortgage, and then either hold onto the cash in a higher interest savings account, or pay a bit off on the HELOC.
What would you do? Thanks for the time to read this, and give me opinions!