Author Topic: How many here have switched from Mortgage Fast Pay to Money Market?  (Read 954 times)

jnw

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Since Money Market pays about 4.5% now, how many here have decided to put the extra cash, which normally would of been used for mortgage fast pay, into money market instead?  Say your mortgage rate is 3%, wouldn't it make sense to put it in the money market while it's higher than the mortgage rate?  Then when the money market drops to the mortgage rate, you can pull X amount from the money market account to pay down the mortgage all at once?

I was going to fast pay according to my IPS, but since money market is so high, liquid and safe, I've decided to temporarily just place all the cash in there.. that way I have more cash needed if there is some unforseen large emergency.


SilentC

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #1 on: February 10, 2023, 05:46:43 AM »
Depends on your tax situation.  Donít forget you pay ordinary income tax on the money market income.

jnw

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #2 on: February 10, 2023, 06:20:07 AM »
Depends on your tax situation.  Donít forget you pay ordinary income tax on the money market income.

Yeah I'm low income so taxes on the interest is $0 for me (both state and federal) .. at least for the next 10 years or so, until I build my net worth up enough. (My primary income is SSDI which doesn't count as income up to a certain point.) 

But also in the right tax situation you'd get to use the interest paid on home for a tax deduction right?

Also you can buy VUSXX from the money market account; that way you wouldn't have to pay any state/local taxes on that.

But yeah I know what you mean.
« Last Edit: February 10, 2023, 06:22:40 AM by JenniferW »

simonsez

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #3 on: February 10, 2023, 09:42:43 AM »
I was going to fast pay according to my IPS, but since ...
You can always have contingencies built into your IPS based on prevailing conditions.  If you know the range of likely scenarios beforehand and how you'd like to act under each set of circumstances, your IPS can reflect that and then if the time ever comes when a specific scenario is realized, you'll know exactly what to do and your autopilot will still be engaged.

"When the prevailing rate of Benchmark X is in this range, we'll act in accordance with investment strategy A.  When Benchmark X is higher, we'll act in accordance with investment strategy B."

The investment order touted on this forum has conditionals built in based on the interest rate of the debt.  It's not much different than that.  Make as simple or as sophisticated to your own needs.

jnw

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #4 on: February 10, 2023, 10:32:35 AM »
I was going to fast pay according to my IPS, but since ...
You can always have contingencies built into your IPS based on prevailing conditions.  If you know the range of likely scenarios beforehand and how you'd like to act under each set of circumstances, your IPS can reflect that and then if the time ever comes when a specific scenario is realized, you'll know exactly what to do and your autopilot will still be engaged.

"When the prevailing rate of Benchmark X is in this range, we'll act in accordance with investment strategy A.  When Benchmark X is higher, we'll act in accordance with investment strategy B."

The investment order touted on this forum has conditionals built in based on the interest rate of the debt.  It's not much different than that.  Make as simple or as sophisticated to your own needs.

Yeah I had contigencies to do A or B depending on whether or not I-Bond rate was higher than mortgage rate.. I didn't even think about money market at the time because it was so low.  I so need to rewrite it and add to the rules. It'll be fun though revising it with expanded rules. I am sure I'll have to keep revising it as I learn more.

Must_ache

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #5 on: February 10, 2023, 10:48:30 AM »
Set up an account at Treasury Direct.
Recent auctions of 8-26 week T-bills yielded between 4.6%-4.75% and they are exempt from federal income tax.
The $$ come straight out of, and go straight back into the checking account you link.
I currently hold $50K and will probably double that next week. (4%/8% of my net worth) 
« Last Edit: February 10, 2023, 10:51:15 AM by Must_ache »

jnw

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #6 on: February 10, 2023, 10:59:46 AM »
Set up an account at Treasury Direct.
Recent auctions of 8-26 week T-bills yielded between 4.6%-4.75% and they are exempt from federal income tax.
The $$ come straight out of, and go straight back into the checking account you link.
I currently hold $50K and will probably double that next week. (4%/8% of my net worth)

I thinkthey are only exempt from state/local taxes, not federal?

index

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Re: How many here have switched from Mortgage Fast Pay to Money Market?
« Reply #7 on: February 10, 2023, 11:49:28 AM »
Set up an account at Treasury Direct.
Recent auctions of 8-26 week T-bills yielded between 4.6%-4.75% and they are exempt from federal income tax.
The $$ come straight out of, and go straight back into the checking account you link.
I currently hold $50K and will probably double that next week. (4%/8% of my net worth)

Or use Fidelity and their vastly superior software.