Not rolling the proceeds from a primary res into the next primary res so you can invest it in stocks is the same as taking out a second mortgage from your equity and investing it if you had stayed put. If you haven’t borrowed all of your equity you can’t give advice for someone else to invest theirs just because they are in the midst of a transaction.

To add to cellar and AN’s tax deduction debate and to side with cellar, you can’t use your top tax bracket percentage to determine you tax benefit. Asianautica, it is a common misconception to think you pay 37% in income taxes, therefore you can reduce your taxes by 37% for every dollar of increased deduction, you can’t, it doesn’t work that way, they are brackets. Income tax doesn’t work like sales tax, you probably only paid 37% on the last 10k of your income and you paid 15% on the first 20k, the stuff in the middle each has it’s own rate. If sales tax worked like income tax and you wanted to buy a $10,000 item, the first 1k is taxed at 1%, the next 3k is at 2%, the next 2k is at 4%, the next 3k is 5% the last 1k is at 7% (income tax is even wackier, this is for illustration purposes). You choose to buy the item on e-bay, avoid the sales tax and think you saved $700, you didn’t. Or if you and the seller agreed to report the sale as 5k, you figure you saved $350, you didn’t do that either. So you see, the more you deduct, the smaller the percentage. If you increase your mortgage deduction by 50k by taking on a bigger mortgage, some would be 37%, some 33% and some 28%, so you have to look at the actual tax return and adjust the percentage downward, taking on more debt, lowers the the average percentage further. The only way to determine the cost/benefit analysis is to run the real numbers through your own tax software, modifying last years return will come close, using your top bracket is pure realtor/lender misconception or snake oil.

discliamer-I have used turbo tax for years so I guessed at the brackets and their percentages but the point is the same.