So here I am in my late 50's and Mrs. Gee and I are within spitting distance of having our mortgage paid off. It's something every middle-aged, middle-class person looks forward to, right? Also, we're currently doing some home renovations. Instead of borrowing money to fund the renovations we're spending our own money in the spirit of not increasing our debt burden. So we got this weird advice from a financial planner recently. He said that instead of doing our home renovations with our own cash we should refinance to a 30 year and take out like another $200K in debt! WTF? Who'd advise making mortgage payments when your 80? Isn't paying off debt prior to retirement just plain common sense?
Might make sense if you think you can earn more than the interest charged. As a trader you should be able to beat 3% or whatever the banks charge these days.
I'd say as long as you're not drawing down your retirement assets to fund the renovations then you're doing the right thing. I paid off my mortgage as early as I possibly could (in my early 40's). Refinancing now you'd be seeing a larger chunk of each mortgage payment going to interest since you'd be starting over with a new mortgage. In my case I paid off my mortgage before I started trading full time so as to not have any extra financial pressure in the early days of trading.
Damn looking to things in percentage is really strange. 3% on 200k is basically 6k profits. I think there are some traders who underestimate their abilities.
Older one is, insane to be taking on new debt no matter what interest rates are. If you a stock trader, buy on little margin or futures are leveraged, but leveraging a home when you in your 50s, you are closer to having bad health than when in your 20s.
If you have been trading profitably for over 10 years, then generating more than 6k profits on 200k capital should make you wonder about "parking" your own capital. Also, how much capital will you need for your renovation? someone tried to convince their family member who controls a property inheritance to remortage all for speculation, and this had been met with a huge no, so I can understand the reservation for those who are not into trading; but if you have been long into trading, I do not understand why you'd rather park your own capital. You should have mastered trading risks.
The financial planner thinks you'll lose a lot of your emergency money if you spend that cash on renovations. So he probably wants you to have more liquid cash in the event you need it, hence the refinance idea.
That's fine on paper but what happens if I die or have a stroke or some other health event? I can trade but not my wife. I'd hate to have her or some ham-handed stranger try to unwind any open positions in my absence.
a fixed mortgage at historically low interest rates is a bet that inflation will come back. if you won't be overleveraged, I like it.
Yeah, I've been intentionally omitting actual personal numbers. The renovations are maybe half of our cash reserves. I agree cash reserves are important but we're certainly not going all-in with the renos.