[quote=MountainBound]If I were to take a 5% loan,effective rate would be around 3.6% with the tax break, then get into 10-year treasury when rates are over 10%, I think it might work. Worse comes to worse and rates never go up, I could pay off the loan and be done with it. I’m sure there are risks, but I’m confident the financial mess will get much worse from here. What do you think?[/quote]
It would only be a 3.6% effective rate for the first year and goes back to 5% every year after that. At about 15 years (I think) your, principal/intrest ratio would be so low that you wouldn’t have a tax write off.
If you lost your job, or source of income your effective rate would rocket back to 5% because you wouldn’t have an income to write off.
So, let’s do some easy math on a $500,000 home loan.
Year 1 your cost is $18,000 to barrow the $500k. You can make 1% easily in savings accounts which offsets your cost by 5,000.
Year 1 your in the hole $13,000
Year 2 = ? (Now we have to get the mortgage calculator out because I don’t know what the Principal would be) It’s a safe assumption to be making 1.5% in a FDIC insured savings account by 2012.
