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From: dys@homxa.UUCP (D.SZE)
Newsgroups: net.invest
Subject: Re: A penny saved...
Message-ID: <1139@homxa.UUCP>
Date: Tue, 8-Oct-85 14:28:42 EDT
Article-I.D.: homxa.1139
Posted: Tue Oct  8 14:28:42 1985
Date-Received: Thu, 10-Oct-85 06:30:17 EDT
References: <161@aplvax.UUCP>, <33700010@hp-pcd.UUCP>
Organization: Bell Communications Research
Lines: 31

< <  I've been adding an extra $100 to my mortgage payment every month.
< <  Ignoring taxes, this is the same as investing this money at 12.5%
< <  (my mortgage rate)...
< <  A pretty fair return (and the money in effect is insured!), but of course 
< <  it gets locked up in equity, so if interest rates suddenly jump to 20% 
< <  I'll miss the boat.

There are several ways to get more than 12.5% considering taxes.
Municipal bond mutual mutual funds are only one way, there are also
limited partnerships and others as long as you can stand living without
a guaranteed rate of return.  I'd pay the minimum of the loan and
invest the rest.

< If all your savings is locked up in a house then it may be hard to draw on it
< in an emergency. I have never taken out a second mortgage but assume that it
< will take time and cost money. On the other hand I can borrow up to 75% of
< the equity in my brokerage acount simply by writing a check ...

I have a second mortgage on my house.  My bank lends up to
.75 * (value of house) - mortgage.  It usually costs $150 to apply,
but there are frequent "sales" when you can apply for free.
They issue a book of checks to get money.
There are no charges if you don't write any checks, etc.
The interest rate is prime + 2%, more or less.
I rarely have anything borrowed, but since housing in the NY/NJ
area has appreciated substantially, it's easy to get a five
figure credit line.

David Sze
Bell Communications Research