Originally Posted by rayvt
Absolutely. You can always shorten a 30 year loan to 15 years (or 10 or 20), but you cannot stretch a 15 year loan to 30.
For example: PSA (Public Storage, Inc.) keeps turning over their preferred stocks. Moody's rated A3. PSA-PW coupon is 5.2%. PSA-PA coupon is 5.88% . PSA-A Search Results - QuantumOnline.com
An older issue, PSA-PQ coupon is 6.5%--but the call date is 4/2016 and it will probably be called. PSA is a serial refinancer like me---rolling to a lower interest rate when rates drop and standing pat when rates go up
Historically, the S&P500 (including dividends) the worst 25 year rolling period had a CAGR of 7.2%. the 95'th percentile 25 year rolling return had CAGR of 8.1%. Median was 10.2%.
So over the lifetime of a mortgage, it is highly likely that the investment return will far outpace the mortgage cost. The main issue is being sure that you can keep making the payments in the periods where the market goes down.
This is exactly my line of thinking, Ray. I have all sorts of investment grade preferreds yielding 6.25% to 7% that haven't missed a payment in up to 50 years since issued. Im not paying off my 3.75% note when I can use the money to collect safe 6% plus interest. Yes, the price of the preferred stock can/will drop, but that doesn't bother me either as I reinvest the money anyways and would just get a higher yield if it did.
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