Who woulda thunk

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By: John P. Napolitano, CFP®, CPA, PFS, MST

In second place, right behind the American Dream of owning a home is the thrill of paying off your mortgage. But with interest rates for mortgages hovering in the low to mid 2% range, I ask why?

I’m sure that most of us displaying or hiding your grey hair remember your early home buying experiences. My first home purchase came with a 3 year adjustable mortgage at 14.25%. WOW! Do the math on that one. My current rate of 2.25% means that the monthly payment is only 40% of what it would be at 14.25%.

Not only was the rate unbelievable, but the methodology for closing was also memorable. Due to COVID caution, the closing actually happened in my car. The attorney came out and presented us with the pile of paperwork to sign, and then joined us via phone to go through the entire package while he peered at us through his office window to actually witness our signatures.

Like everyone else, part two of the dream had me rushing to throw extra money at the loan to eradicate it faster. While this is a practice that I had always followed, with the recent re-finance, even I decided to take a different path. My path is to take that monthly savings and invest it each month. With markets at all-time highs, this seems like an easy decision as mostly everyone is overly optimistic about markets and investments today… but I know better.

There will be a day, week, month or year(s) where I’ll regret this decision; that is for certain. But in the long run, I have the confidence that capitalism and a diversified portfolio will earn me more than the cost of the money. I wouldn’t call this irrational exuberance, just optimism. Irrational exuberance is Game Stop and other hot handed stock pickers who may be feeling invincible and gloating today, but they too will have their day or reckoning, and may land with a loud thud.

 

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

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