Hoard cash vs pay down mortgage

So the market seems plateaued in certain areas in Bay Area (some went down). If there’s a recession just around the corner (say 2~3 yrs), whats the best approach now? Hoard cash so we can buy a bigger place or keep paying down the mortgage like nuts?

Is it even possible to take a Heloc and use the money to make a downpayment on another property? Assuming our dti test comes out green, of course. I’m just trying to figure out the financial planning for the next few years… :slight_smile:

Paying down the mortgage is the last thing I want to do with low interest rates. You can do whatever you want with the money from your HELOC, including using it as down payment on another property.


Whatever approach you think would allow you to assess the situation calmly and make wise decision :slight_smile:


Agree. Right decision for @harriet would be to not paydown as she’s young and early career. May not be the decision for someone looking for stability


Month over Month prices down in Marin and Napa. Since 1988, the average change in sales between May and June is an increase of 4.3 percent.

YOY no drop


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Cash = flexibility
Pay down mortgage = money tied up

Flexibility makes more sense in almost all cases, especially with low rates.

There’s no point to pay interest if you have money. The best option is the pay down the mortgage and get a Heloc. You get to enjoy both

How much emergency money should a family hold? Please respond in terms of # of months of expense including Mortgage+Property taxes.

Ideally 6 months, not more than 12 months and not less than 3 months.


This should depend on how long you think it will take you to get a new job. E.g. specialized field and senior position might take a year to find something if you were not actively looking.

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How about get a few credit cards with high credit limits? Also, get HELOC before you get laid off.

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I used to hold 2-3 months cash on checking account, but rest in taxable investment account.

Reg high credit cards, we should avoid it as the rates are around 20%+. HELOCs are perfect backup plan. However, banks may freeze during recession period (it depends on bank and at that situation). JP Morgan froze my HELOC during 2008-2009, but that was real estate recession.

Invest the cash wisely to grow higher, use it to buy real estate when you see correction on real estate prices. HELOCs can be used for next purchase, but banks may view HELOCs differently.

If you have 100k HELOC and use it, when you go to mortgage, they deduct 1% ($1000/month) as your monthly liability that will be deducted in your DTI eligibility.


It seems more folks are suggesting investing the cash. The thing is, it’s hard to get consistent 5% return in this market, no? And if one’s expecting re price to drop, stock will drop sooner.

Hoarding cash is also a good option, but I’d be losing on inflation + opportunity cost for not paying off mortgage sooner. Hmm…

Thanks Jill for the note on increase in dti calculation if one has a heloc. That’s good to know.

Also diversify by investing in bonds, baby bonds, CEFs in the fixed income space and not just stocks.

Credit cards can be cancelled by your bank in 1 second. Not reliable at all. We had situation when 2 credit card 50K each (100k total) got cancelled by BoA and Amexi in 1 day… we relied on those CC. CC is “potential” money


So far you’re the only one who brought out bonds. Why bonds and not dividend stocks?

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Agreed! Tesla bonds are rated junk and pay just over 5%. That’s crazy. You can get stocks that yield that much.

I get being worried about a crash. They do happen. You could just DCA into an index fund over a 2-3 year period. That way if there is a crash you’ll just average in at lower cost.


In a crash, junk bonds are worse than dividend stocks right? Companies that issue the junk bond could go insolvent since by definition not so good companies issue junk bond :grinning: Tesla is an exception? OTOH, dividends are given by good businesses that existed a long time and with a strong balance sheet.


Plus with DRIP you keep buying more shares at a lower price.

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Companies can stop paying dividends. In fact, as business deteriorates, companies will slash dividends first. The bond may take a small hit in price as business deteriorates but more often than not bond interest will continue to be paid. This is because a bond default is more shameful than a dividend cut. In the worst case (bankruptcy) bond holders have higher repayment priority. But I am sure you know all this. All I am saying is that you need to have a mix and not just dividend stocks.