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Old 10-16-2015, 08:32 PM   #21
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Originally Posted by rayvt View Post
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 -
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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Old 10-16-2015, 09:59 PM   #22
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I would go with the 15 yr mortgage if you already have a bunch of stock investments.

The reason is the savings is a guaranteed tax free rate, and it is a hedge against 0% to extremely low growth.
There is no guarantee you will earn 5% in the market for the next 20 yrs. Just ask anyone who invested a 100K in 1927 how it felt to wait until about 1954 to be back to 100K. (my dates are rough but it really was about that long).

Also the deduction idea of a mortgage becomes worthless for most folks when you owe less than 90K (even more when interest is low like now).

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