I'm really surprised that only one( Mz. McGrath) of all these high paid financial wizards missed the obvious fact. Yes interest rates are extremely unattractive now. Operable word...NOW. However it is highly unlikely they will remain so for long and in a few short years the pendulum could well swing,and if history is any predictor probably will , to a point where you would be well ahead of the game by getting back into long term Cd's. But if you paid down your mortgage back in 2008 well,,,,sorry. No,for the small amount you would gain now I think it would definitely be the wrong move. Take it from one who did exactly that in the middle 80's when circumstances were very similar to today. Man was I kicking myself when by the end of the 80's one year CD's were bouncing off 10%.!Never again
Geo.
of CT
@
Jul 02, 2008 00:36:38 AM
The reader states s/he "doesn't expect to need this money anytime soon." What does "soon" mean? A year, three year, five years? From the way the question is stated, it seems the reader does not want to suffer any loss of principal and isn't thinking about inflation. If that is the case, there are very few places to keep cash around.
By putting money into the mortgage, the reader will get the same as a 5.75% return on the money. But, to get at the money, will the reader want to take out a home equity loan and pay 7 or 8% interest?
Why is the reader worrying about the mortgage tax deduction? Is the reader taking the tax savings and investing it? If the money is not being invested for the long-term, it makes no sense to spend $1 in interest to save 25 cents.
JimmyDaGeek
of MD
@
Jun 30, 2008 09:14:10 AM
Mr Fenstad's assumptions about CD rates is incorrect. You can actually get over 4% on a one-year CD and over 5% on a four-year CD (www.money-rates.com) which makes the comparisions better vs other investments somewhat better. It seems hard to answer the question above without knowing the age of the person. Isn't the advice given to a 25-year old much different than the advice given to a 65-year old?
Kimberly Palmer, senior editor for U.S. News & World Report, writes about how to save money, avoid scams, manage debt, and be a savvy shopper. Send your personal finance questions to her for expert money advice.
Geo. of CT @ Jul 02, 2008 00:36:38 AM
JimmyDaGeek of MD @ Jun 30, 2008 09:14:10 AM
Stephanie of CA @ Jun 27, 2008 10:05:26 AM
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