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rated:
I'm refinancing rental at 3.875% 30yr fixed conforming (current loan 292 + cash out 125 =417k) which will release @125k.
The cash cost will start rolling up at 3.875% annually as soon as I close on refi.
While I decide on buying primary home in next 3-9 months, I'd like to learn about options to park cash out $$ so that my cost (3.875%) is minimized.
Are there any viable options in stock market where I can be reasonably certain to earn at least 3.875% pa ?
Appreciate your thoughts...





 

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rated:
Nothing is certain to earn anything except bank accounts.

Figure out how to hack together several RCAs.

rated:
callMeAmit said:   I'm refinancing rental at 3.875% 30yr fixed conforming (current loan 292 + cash out 125 =417k) which will release @125k.
The cash cost will start rolling up at 3.875% annually as soon as I close on refi.
While I decide on buying primary home in next 3-9 months, I'd like to learn about options to park cash out $$ so that my cost (3.875%) is minimized.
Are there any viable options in stock market where I can be reasonably certain to earn at least 3.875% pa ?

 

yes, yes there are definitely ways to get a relatively reliable 3.875% return...except the holdings might not be worth as much when you want to sell them!

congrats on a spectacular rate for a non-OO cashout refinance, by the way. what's your LTV?

rated:
For 3-9 months, there's going to be a good chance most investments that can return 3%+ might lose some value. If you could weather a loss of 5% or so, I think I'd still put it in a very broad index fund. But if that would jeopardize your plan to purchase a residence, I recommend getting a truly guaranteed 1% or so with a good savings account.

I'm curious about the loan too - are you paying points? I've got a couple of non-OO, no cash out refis in progress at 3.75%. LTV is around 50%, and credits of about 1% are covering all the real costs - appraisal, lender, title, credit fees. Mine are with a zillow broker, provident is their lender.

rated:
I was in a similar situation to you. I did a cash-out refi and planned to deploy it within 3-5 years out. For my income bracket and risk profile, I felt comfortable putting the money into CA muni bond index funds. The tax-equivalent yield for me was >5% (Bankrate Calculator).

Here's the thread for the complete context -- https://www.fatwallet.com/forums/finance/1499450

rated:
caproperty said:   I was in a similar situation to you. I did a cash-out refi and planned to deploy it within 3-5 years out. 
  why are people doing cash out refi but not plan to use for 3 years?

rated:
rufflesinc said:   
caproperty said:   I was in a similar situation to you. I did a cash-out refi and planned to deploy it within 3-5 years out. 
  why are people doing cash out refi but not plan to use for 3 years?

  
Lock in some cheap money long-term?

rated:
Not going to dent that pile of cash, but I have gone for opening bank accounts for short term for the signup bonus. Some do not have a minimum required balance - just keep account open. So open, reduce account balance where allowed = the yield you are looking for a modest portion of the cash and it is still liquid. Some of them allow opening account balance by CC if you are careful which CCs code this as purchase - not cash advance. Pick up additional 1-2 per cent very quickly. Use your pile of cash to pay CC right after billing.

http://www.doctorofcredit.com/best-bank-account-bonuses/

rated:
Consider looking at some preferred bank stocks that are right around the call price, which is almost always $25.  Most will pay around 6% and rarely move much if any in price.  I tend to buy RBS and ING (european) shares.  I think the payouts are quarterly though so you have to make sure your buy and sell dates coincide with ex dates. 

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