HELOC or fixed for second mortgage.

[sdcellar]

Also, you point out the tax on earnings, but I think the math helps: 5%*.65 = 3.25%.

I can’t believe I let this go because we’re back to losing money with our bitchin’ HELOC. So, as you point out, I can’t really make money until my return on cash gets higher.

[citydweller]

sdceller,
Yes, I have worked the system this way. I HELOC’d 10K (locked the rate at 6.5%) and put the money in a 12 month CD at 5.1%. I’m probably not coming out ahead interest wise, but for me it is the only way I can save money. I’m really good about making monthly payments, but I’m not good at saving. Also, at the time I had hoped that CD rates would keep going up, but they seem to have stalled around 5%.

[citydweller]

sdceller,
Yes, I have worked the system this way. I HELOC’d 10K (locked the rate at 6.5%) and put the money in a 12 month CD at 5.1%. I’m probably not coming out ahead interest wise, but for me it is the only way I can save money. I’m really good about making monthly payments, but I’m not good at saving. Also, at the time I had hoped that CD rates would keep going up, but they seem to have stalled around 5%.

[Raybyrnes]

You are being a little short sighted here. Time is probably on your side. Historically you are going to earn 10 to 12% indexed to the market. So yes you have to beat a rate of return. Additionlly you are liquid when you need to be. Show up at a bank when you need money and you are a high risk and they price to your risk. Borrow when you are a low risk and you have control of the terms and conditions. Fix the rate on the Line of Credit and if interest rates continue to go up you are in an arbitrage situation. If rates drop back to the 4 % levels they wer at a few years ago you pre pay it back.

[Raybyrnes]

You are being a little short sighted here. Time is probably on your side. Historically you are going to earn 10 to 12% indexed to the market. So yes you have to beat a rate of return. Additionlly you are liquid when you need to be. Show up at a bank when you need money and you are a high risk and they price to your risk. Borrow when you are a low risk and you have control of the terms and conditions. Fix the rate on the Line of Credit and if interest rates continue to go up you are in an arbitrage situation. If rates drop back to the 4 % levels they wer at a few years ago you pre pay it back.

[sdcellar]

Ahh, you missed my use of the word “effectively” when I posed the question. Sorry, but I laid the trap intentionally…

I hear what you’re saying about not being able to save money otherwise, but I worked the math on your example (including tax considerations using a 28% marginal tax rate) and you made a whopping 55 dollars and 91 cents.

Might I suggest you join Vons Club or something similar instead as a better way to save/earn money.

Clearly, you’re admitting that it might not have worked out as you as hoped, so I give you full credit for the courage to do so.

[sdcellar]

Ahh, you missed my use of the word “effectively” when I posed the question. Sorry, but I laid the trap intentionally…

I hear what you’re saying about not being able to save money otherwise, but I worked the math on your example (including tax considerations using a 28% marginal tax rate) and you made a whopping 55 dollars and 91 cents.

Might I suggest you join Vons Club or something similar instead as a better way to save/earn money.

Clearly, you’re admitting that it might not have worked out as you as hoped, so I give you full credit for the courage to do so.

[sdcellar]

Raybyrnes–

You mean me? I’m the short sighted one? You make beating a rate of return sound easy. And what is this liquidity you speak of? Cash is liquid, investments are not–at least not ones that earn 10% or more, nor a plain old 5.1% CD.

[sdcellar]

Raybyrnes–

You mean me? I’m the short sighted one? You make beating a rate of return sound easy. And what is this liquidity you speak of? Cash is liquid, investments are not–at least not ones that earn 10% or more, nor a plain old 5.1% CD.

[citydweller]

I do have a Ralphs Club card, and every 6 months or so I get $10 off a bottle of wine.

Thanks for working out the math for me, I’m glad to see that at least I didn’t come out negative.

And as the other poster pointed out, the liquidity is a plus. If I needed 10K today I doubt I could get it at 6.5% fixed.

Does anyone see CD savings rates going above 7% in the next 10 years?

[citydweller]

I do have a Ralphs Club card, and every 6 months or so I get $10 off a bottle of wine.

Thanks for working out the math for me, I’m glad to see that at least I didn’t come out negative.

And as the other poster pointed out, the liquidity is a plus. If I needed 10K today I doubt I could get it at 6.5% fixed.

Does anyone see CD savings rates going above 7% in the next 10 years?

[Raybyrnes]

SDcellar. I effective am pulling it off with my student loans. Pulled 60 k out to go to grad school at 2.77%. fixed the rate at 2.875. I got $2000 back for consolidating with my lender and making a single payment. I recieve a .25 % rate reduction for auto pay and 1% reduction for 36 month of on time payments. That gives me a rate of 1.625 to work off. My company reimbursed me for the majority fo my grad work. I have had roughly 50% of that money in money market accounts and have invested the rest over the last 3 years. The 30K invested has earned about a rate of return of about 14% annually. I put some money into Cohen and Steers REIT and Some into Schwab International funds. This type of circumstance is clearly not the norm but the reality is that there are opportunities that often time present themselves.

[Raybyrnes]

SDcellar. I effective am pulling it off with my student loans. Pulled 60 k out to go to grad school at 2.77%. fixed the rate at 2.875. I got $2000 back for consolidating with my lender and making a single payment. I recieve a .25 % rate reduction for auto pay and 1% reduction for 36 month of on time payments. That gives me a rate of 1.625 to work off. My company reimbursed me for the majority fo my grad work. I have had roughly 50% of that money in money market accounts and have invested the rest over the last 3 years. The 30K invested has earned about a rate of return of about 14% annually. I put some money into Cohen and Steers REIT and Some into Schwab International funds. This type of circumstance is clearly not the norm but the reality is that there are opportunities that often time present themselves.

[sdcellar]

citydweller– I happened to receive my free $10 starbucks card today for updating my contact information at dell.com, so between you and me, we’re seeing a pretty good rate of return in the beverage department!

raybyrnes– Somehow I must have missed the HELOC in your example. I ask for an apple and you give me an orange? And man, when did they make student loans so cheap? Who the hell is paying for that? Wait, that just might be me (among others). Well, color me stoked that you’re able to make money off the benevolence. Probably just envy talking now…

[sdcellar]

citydweller– I happened to receive my free $10 starbucks card today for updating my contact information at dell.com, so between you and me, we’re seeing a pretty good rate of return in the beverage department!

raybyrnes– Somehow I must have missed the HELOC in your example. I ask for an apple and you give me an orange? And man, when did they make student loans so cheap? Who the hell is paying for that? Wait, that just might be me (among others). Well, color me stoked that you’re able to make money off the benevolence. Probably just envy talking now…

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