Loking for a litle help. I have purchased a vacation lkae home in East Texas and am debating a $100K mortgage or cash purchase. Can anyone recommend a low-risk 15 yr fixed income investment that would be a better use of my money, and that wuld cover the mortgage paymnet (need about 8% return)?
Thanks for all the input. I'm still leaning toward paying cash for the property to
1. minimize closing costs
2. eliminate all monthly principal pmts
3. minimize risk
There doesn't seem to be an investment vehicle available NOW that would accomplish the same objectives, and I do want more time to go fishing and play with the Mrs & grandkids.
Thanks again, Dan
I agree nothing is completely risk free. Not even a 15 year US Gov Guaranteed instrument. But I happen to be running this scam on a 4.375% 600k mtg. Even if rates are 20% when the mortgage is paid the fund will have some value. And I will be in it cost free. So maybe rates wont stay at 20% forever.
I hear you as far as Lurch is concerned because I bet you would stay completely on top of managing all of the risk issues with regard to owning it. I am not sure, however, that that is what Soscorp wants to do.
I thought I heard him say that he wanted virtually a guarantee (no risk) that he could improve his position by investing borrowed capital. My suggestion to Soscorp and to you is that there is always a risk (even if for a brief period of time) that the market will deliver a blow which a person or an institution cannot withstand.
If you look at current muny bond yields on 16 year A or AA rated bonds I think you will find they are less than 4%. If you look at the fund over its life. The fund has ranged from 7.31 to 11.25. Current price 9.18 about in the middle of the range. You get to deduct your interest on mortgage from you taxes. What are interest rates going to be 15 years from now. Probably between 3-10%. BWTFDIK
Would need 9.6% to cover P&I on $100K for 15yr at 5.38%, but MVF 6.9%i would cover a portion of principal pmt and give my the mortgage interest writeoff with no associated tax liability on interest income. The gamble is with the value of the fund after 15yrs.
According to the Wiesenberger Service (see Closed End Funds Assn site) as of 9/30 MVF's portfolio was about 60% AA or better, 25% below A. This is one reason for their high yield. Most of these funds are now selling at a discount to their NAV, which does mitigate the risk of falling values as rates go up. I like the asset class, and FWIW my favorite is IQM. But they are not without risk, particularly in an environment of rising interest rates.
Well he buys the fund. It pays his mortgage in 15 years. and he has the fund when the house is paid for. It is run by Merrill Lynch and has been around since 88. Looks like a lead pipe cinch to me.