Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 6/24/83; site pixdoc.UUCP Path: utzoo!linus!philabs!cmcl2!harvard!talcott!wjh12!pixel!pixdoc!vsh From: vsh@pixdoc.UUCP (Steve Harris) Newsgroups: net.invest Subject: Re: Mortgage Down Payments and Good Investments Message-ID: <20@pixdoc.UUCP> Date: Fri, 15-Nov-85 19:17:34 EST Article-I.D.: pixdoc.20 Posted: Fri Nov 15 19:17:34 1985 Date-Received: Sun, 17-Nov-85 06:43:05 EST References: <1439@decwrl.UUCP> Organization: Pixel Systems, Woburn, MA Lines: 51 In <1439@decwrl.UUCP>, marks@yogi.DEC asks (paraphrase): How much of the profit from the sale of my old house should I put down towards my new house, and how much should I invest elsewhere, and where should I invest it? I'm no expert on these things, but, as another new home buyer, here goes... Let's say your mortgage rate is 12%. Then, any extra money you put into your house (either in down payment or increased monthly payments) represents an investment at 12%. However, because of the enormous tax benefit of mortgage (interest) payments, the actual return on your prepayment investment is more like 8 or 9%. If you invest the money in, say, a mutual fund (with a good track record), you should be able to realize at least a 10 or 11% return. I'm not sure how to account for the appreciation of the house, except to note that the phenomenal growth in the housing market here in greater Boston (37% last year, according to the Globe) seems to have slowed considerably (according to my realtor friends). Also, if you don't invest your profits in a new home, I believe you have to pay capital gains tax on them. Of course, there may be ways around that, I don't know. As for ways to invest, good luck. Consumer Reports evaluated mutual funds a few months ago -- look up that issue. Also, Forbes and Money (among so many others) do regular ratings of the Mutual Funds. Everybody seems to like Fidelity Magellan. However, you may need tax sheltered investments. Certainly, you can put some of the cash into an IRA (which can be in a Mutual Fund like Magellan); also, if you can point to any self-employed income (you don't do any consulting?!!), you can put a lot of that into a Keogh (significantly more than in an IRA), and avoid taxes that way. A good book is "The Only Book You'll Need To Buy On Investments" (or some such title) by Andrew Tobias (wow, I actually remembered his name!). In short, you have many options, and I don't know what would be best. If I were in your shoes, I would consult a good investments advisor (not a broker -- they're just salesmen). I don't know of any, but I have a good accountant I can recommend, send me e-mail if you want his name. -- Steve Harris | {allegra|ihnp4|cbosgd|ima|genrad|amd|harvard}\ Pixel Systems Inc. | !wjh12!pixel!pixdoc!vsh 300 Wildwood Street | Woburn, MA 01801 | 617-933-7735 x2314