At another time, I could probably solve this problem myself; but unfortunately, it's not another time.
A divorce is looming for me. We are amiable, not angry or vengeful, but the division of assets can raise ire’s. I believe we’re coming to a good solution—which includes my wife getting the house in her home town. However, I need to pay it off (approx. $50,000). I can generate that from disposable income with some belt tightening in about a year (avoiding having to tap into any deployed assets; i.e. stock, bonds etc.).
However, the time value of money is giving me pause….
The mortgage is 5.15%. So if I pay it all off now, no interest for the next year (I’d use EE bonds paying 4%). These bonds represent my “dry powder,” cashing them and buying DG stocks on dips, etc. So normally I wouldn’t touch them.
If I pay off the house from my income, I’ll pay interest for the year it will take me to do it; and if I use the bonds-- done deal. Then I got an idea, what if I used the bonds to pay the mortgage, and then spent the next year tightening my belt and deploying that same 50,000 into a high yield, low to moderate growth dividend payer (or five would make me more comfortable). I don’t pay the mortgage interest, and I lose the bond interest, but I gain a large position in a/some high yielding payer(s). I think with this “pay and invest” strategy, I’d come out ahead of the game at the end of the year.
I have to admit my thinking isn’t the clearest just not—and I’m generally not good at math to begin with—so I thought I’d seek some advice from the number-crunchers here. Does my by pay and invest plan generate a net gain? Is it the least expensive way to take care of this mortgage?
Thanks,
Ronn
A divorce is looming for me. We are amiable, not angry or vengeful, but the division of assets can raise ire’s. I believe we’re coming to a good solution—which includes my wife getting the house in her home town. However, I need to pay it off (approx. $50,000). I can generate that from disposable income with some belt tightening in about a year (avoiding having to tap into any deployed assets; i.e. stock, bonds etc.).
However, the time value of money is giving me pause….
The mortgage is 5.15%. So if I pay it all off now, no interest for the next year (I’d use EE bonds paying 4%). These bonds represent my “dry powder,” cashing them and buying DG stocks on dips, etc. So normally I wouldn’t touch them.
If I pay off the house from my income, I’ll pay interest for the year it will take me to do it; and if I use the bonds-- done deal. Then I got an idea, what if I used the bonds to pay the mortgage, and then spent the next year tightening my belt and deploying that same 50,000 into a high yield, low to moderate growth dividend payer (or five would make me more comfortable). I don’t pay the mortgage interest, and I lose the bond interest, but I gain a large position in a/some high yielding payer(s). I think with this “pay and invest” strategy, I’d come out ahead of the game at the end of the year.
I have to admit my thinking isn’t the clearest just not—and I’m generally not good at math to begin with—so I thought I’d seek some advice from the number-crunchers here. Does my by pay and invest plan generate a net gain? Is it the least expensive way to take care of this mortgage?
Thanks,
Ronn