My wife and I (both early 30s) are planning to buy a home in the near future. Our credit scores are excellent so PMI rates on a conventional mortgage are very low <.5% when we put 10% down. We have the funds available to put 20% but it would require selling additional appreciated stocks and paying the resulting capital gains (my state treats gains as regular income at 8.5%). By my calculations, on a $450k home with 10% down, I would pay $2k per year or less in PMI. This works out to around 4% interest per year on the extra $45k that I’m essentially being able to keep invested. I’ll of course also be paying the ~3.5% mortgage interest on an extra $45k. We’d likely pay the loan down below 80% LTV in a year or two and/or have a reappraisal. Thoughts?
I want to stress that this isn’t a case of not being able to afford. It’s an optimization question. We have a > $250k HHI, > $600k NW, save $8k+ per month, pay $2,600 in rent (basically same as what mortgage will be), only debt is $20k (@5.49%) on a piece of land valued at $125k, and no kids.
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