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Ask Lane Your Own Question
Category: Finance
Satisfied Customers: 11822
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Brokers- What to do, as I need to lower my overhead Take 40k

Customer Question

Brokers- What to do, as I need to lower my overhead Take 40k from my TD ameritrade acct & deposit on home to have low monthly overhead....but how much $$ would I risk losing by not keeping in TD account??? My current rent $1800. , by purchasing with 40k
it could be $640 but no interest on 40k???
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.



If I understand what you're saying here, you're really comparing apples and oranges lowering a pure expense (rent - money that goes out the window for a place to lay your head - that builds no equity) and your cost for that is forgone interest.


You can't really compare the two in the way you can with simple opportunity cost, because you're not taking money from one investment to another investment that has different risk/return attributes ... You're losing money in interest to lose less money in a pure outflow.


To measure paying down a mortgage while the equity in the home is increasing (both by the lump sum amount and in in some assumed fair market value increase) ... along with a reduced interest write-off, against having that money invested at TD Ameritrade earning some assumed interest is VERY doable.


I'm not sure that what your asking produces any usable result


Have I understood your question correctly?

Expert:  Lane replied 1 year ago.

You can certainly simply use the forgone interest against a lowered rent amount ... but that analysis has no balance sheet/(net present value) aspect to it.


I suppose if you assume that you INVEST the rent difference (and earn some assumed return ON that) that tells you one thing ... but it completely ignores the opportunity cost of the alternative ... a large portion of that rent (if it were a mortgage payment) building equity

Customer: replied 1 year ago.
Had I kept the 40K in Td ameritrade what would annual interest
Expert:  Lane replied 1 year ago.

Depends on how it's invested ... If in a basic cash account or money market ... less than 1% today

Expert:  Lane replied 1 year ago.

I hope this has helped


If this HAS helped, and you don't have additional questions on this, I'd appreciate a positive rating (by clicking the stars or smiley faces on your screen) ... that's the only way I'll be credited with a portion of what you've paid JustAnswer.



Customer: replied 1 year ago.
but how much $$ would I risk losing by not keeping in TD account???
Expert:  Lane replied 1 year ago.

If you DO have it invested in say, a money market account ... current money market rates are at less than 1%


So that's 40,000 x .01 = 400 ... (so less than 400 per year)