In 2022, I did a cash-out refinance on my house, which had nearly tripled in value since I bought it in 2015. I took out just under $200,000 at a rate of 2.625%. Originally, I planned to use it for an investment property, thinking housing prices would drop—but they haven’t.
For the last couple of years, I’ve kept the money in 6-month CDs earning around 5.4%, which has covered most of the mortgage interest. With interest rates coming down, I’m wondering if there are better ways to invest this money. I’d like something relatively safe but still earning decent returns. Any advice?
@Shane
I’m pretty handy, but my area is a ski resort town where prices have skyrocketed since COVID. A small condo that was $250k in 2019 is now $600k+. This cash would only cover the down payment, and I’d still need another mortgage.
Starting a business sounds interesting, but with two young kids and a stable job, it feels like a big leap right now.
@Nash
If the local market is too pricey, consider looking an hour away in a more affordable area. Use the cash to buy something outright or with minimal financing so the rental income can offset your existing mortgage. Owning a home outright is a great step toward becoming a landlord.
Congrats on locking in such a low rate! I’d move the money to a high-yield savings account (HYSA) for now.
If you’re okay with market risk, put it in something like VOO (S&P 500 ETF). It’s diversified, pays a small dividend, and should appreciate well over time. Just be prepared to ride out any market downturns without panic-selling.
@Tamsin
Exactly! At 2.625%, that’s basically free money. Anyone who suggests paying down this mortgage early is missing the point. Let that cash work for you!
Have you thought about upgrading to a larger home or buying a multi-unit property? You could use the cash for a bigger down payment while still benefiting from your low effective mortgage rate.
If you’re comfortable with risk, start putting it into index funds like the S&P 500. If you want to be cautious, maybe go 50/50 between index funds and bonds.
Alternatively, stop waiting for the housing market to drop. If you find a property where the numbers work for a rental, go for it.
What’s the end goal here? If you pass away tomorrow, will your family have a home free and clear, or will they have to figure out your financial strategy? Just something to think about.