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