I'm trying to determine if it makes more financial sense to make a larger mortgage down payment or invest in QQQI and use the dividends to help pay for the higher mortgage payment.
So, hypothetically, if I am considering what to do with $100k, I see the numbers as follows.
Assuming a 6.0% mortgage rate, not using the $100k costs me an extra $6,000 of interest each year. I'm assuming that the difference won't cause me to go above the standard deduction, so assume no tax benefit from the extra interest.
If I invest the $100k in QQQI, and assume a dividend yield of 13%, then it generates $13k of income. If I assume that the full amount is taxed at a marginal federal + state income tax rate of 36%, then that yields $8,320 of after tax income, which exceeds the interest cost. I know that this is a conservative view of the taxes, which possibly is too conservative.
If I assume no price appreciation of QQQI, then this appears to make sense to invest in QQQI.
I think that the biggest risk here is the potential for QQQI to fall in price. If QQQI were to fall in price by 30%, then the after tax distributions would be $70k * 13% * (1 - 36%) = $5,824, which now wouldn't cover the interest cost.
I would be planning to keep that money invested for a very long time, so I wouldn't worry too much about the volatility of the value of the underlying position.
What other important considerations should I think about?