Futures vs Mortgage

I was thinking about refinancing my mortgage at 2.25% but then realized the implied financing rate on S&P 500 futures is currently 50bps or less. Can anyone think of a downside of replacing my S&P ETF exposure with futures, and paying off my mortgage with the proceeds?

Does this make sense to anyone? It seems one could realize a lower effective interest rate through this approach.

This seems like a convoluted solution to a simple problem. You’re not a large corporation where such choices make sense in the aggregate, where you have scale, and where you have a prop desk with dedicated manpower and software to manage and maintain your exposures. I’d be concerned about tax consequences, among other things. Maintaining a futures roll is not necessarily an easy and foolproof operation, no matter what the folks on Robinhood chat boards would have you think.

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Yeah I agree with this. I’ve not heard of a single individual put this plan into action and I think the maintenance, tax, and general headache would offset the interest delta.

If you have margin capability, you could also consider shorting a 5 of 10 year treasury, use the short proceeds to pay off your mortgage and pay the coupon at < 1%. At some point however you have to cover your short, so this requires advance planning to ensure you have the funds at maturity. You can make an interest spread but is it really worth it.

Truthfully though, with interest rates at historical lows might be best to just amortize your debt at the lowest possible rate and use all excess cash flow to make lump sum payments. No headache required.


Thank you both for your feedback!