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Refinance VS payoff in full

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  • #16
    The question whether to pay off loans vs. invest can be boiled down to whether or not you will invest the difference (the money that otherwise would have been going to your loans)

    If you refinance to a low interest rate and put all 350k directly into VTSAX (meaning no new cars, no new house, no big vacation) then you are investing the difference, which mathematically will likely be the better option. Psychologically though, the loans may continue to bother you. Which actually might be a good thing. Then you will focus on repaying off your student loans versus spending the additional money over the next few years.

    If I was you, I would refinance the entire loan balance -> If rate is low enough, then invest the entire 350k immediately -> Aggressively pay off entire student loan balance over 1.5-2.5 years


    • #17
      Once you decide which is best for invest now vs payoff now (or split the difference and payoff in 2-3 years), then make an investing plan so when money comes in you know what to do with it. Then there won’t be a large cash drag like you have now.


      • #18
        “I am in my early thirties single, no kids, no other debt.”

        Because of this I don’t think you actually “need” to take risk that comes with leverage of investing. You could, but you don’t need to. I wouldn’t take the choice of market returns vs debt without a need. To me you aren’t planning on long term loan rate vs market returns. You plan on paying the debt sooner. I wouldn’t give into FOMO on short term market returns.

        BD Roth
        Car loan
        Pvt SL
        SL- refied or not
        As long as you hit 20% retirement this year.
        Crush the loans. You don’t need LT leverage.
        With your income and behavioral finance tendencies, 6 months or a year of unknown market returns OR losses is not worth the risk.
        Clean house while it’s easy.


        • #19
          Pay them off and move on. You can’t get bonds with a guaranteed return close to the rate your loans will be and then you’ll have tons of cash flow for investing.


          • #20
            Originally posted by Craigslist View Post
            PM&R makes 500k a year?
            If that's true, let me know if you are hiring. That's my wife's specialty. She could work 0.5 FTU at your place and make what she makes now at 0.9 here!


            • #21
              Originally posted by PMR_Res View Post
              I do not qualify for PSLF (private practice post residency but my 4 years of residency did count).
              i am in private practice and making ~$500k/year.

              I have $350k cash available immediately and by October when Fedloans resume i will have more than enough to cover the entire amount.

              So I can pay off in full with no refinance. If i refi than I will have more to invest, however is that a better move? I know the market is really high right now, perhaps better to pay off in full which is a “guaranteed return on investment“? Then again maybe maximizing leverage for more compound interest in my early thirties…
              Your just starting, do you think todays price will be high in 30 years with a very high probability? Just dump the money into the market and dont look at it or think of it.

              You can search the forums and these exact questions and same answers were given, and then check the market etc...for those dates and see what happened.


              • #22
                Look up the numbers on how much money you'd have if you had dollar cost average invested that 350k over the past 3 years instead of saving cash. It will be a big number. Getting like 630k if you did 10k/month in spy from 2018 to right now.


                • #23
                  Emotions matter. Yours as well as others.