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Help--Diversification Opportunity
Old 04-16-2007, 09:12 PM   #1
Confused about dryer sheets
Join Date: Apr 2006
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Help--Diversification Opportunity


What do you think about the following opportunity?

Bought a house in a costal area in 2004 and put down 28% (instead of the 20% required to avoid PMI) on a 30 yr fixed mortgage @ 5.625 APR.

Converted the house to a rental property last year and covering the expenses with the rent. May sell the house within the next 10-15 years.

By refinancing could unlock approximately $50-$60K (appreciation + 8% extra put down during initial purchase). Estimate cost to refi is between 6.5% - 8% APR + closing costs.

Plan would be to invest these $s in a bradly diversified portfolio of index funds to diversify risk + increase deductions for rental property thus reducing taxes. Currently in 25% tax bracket and have a very solid portfolio of index funds.

Thanks in advance for your advice.

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Re: Help--Diversification Opportunity
Old 04-16-2007, 09:28 PM   #2
Recycles dryer sheets
Join Date: Oct 2005
Posts: 325
Re: Help--Diversification Opportunity

I'm sure the advice your going to get here is not to do it. My $0.02 if you insist on doing it though:

Don't trade a 5.625% rate for 6.5% + Keep the low rate and get a no closing cost HELOC if you want to unlock the value. My HELOC is 6.5% 5 year fixed. I got it like 1 year ago though.
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Re: Help--Diversification Opportunity
Old 04-16-2007, 09:55 PM   #3
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Re: Help--Diversification Opportunity

If you are thinking long-term and have a high tolerance for risk, borrowing to invest may not be bad since the long-term equity is about 10%. However, there are a lot of forecasts that the market may only produce single-digit return.
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