Use 30yr mortgage to fund mutual fund investment/retirement?

As rates continue to fall, I’m considering the following:
My home will appraise for ~500,000
I currently owe $ 200,000 in year 5 on a current 30 yr mortgage @5.875%.

I’m generally very financially conservative and have spent the last 5 years paying down mortgage debt (my only debt) as fast as possible (an extra $ 500/month toward princ.).

Does the following make sense:
1) Take out a $ 350,000 loan for 30 years (hopefully, at 5%)
2) Pay a monthly mortgage of ~2,000
3) Put the 150,000 into a conservative mutual fund to earn a modest 8% interest.

Given the tax advantages of the mortage interest, the numbers look promising. I understand that mutual funds don’t automatically return 8%. Some years they may lose and some years they may get 16% or more. It’s the average.

The numbers will create a nice cash reserve in about 5-10 years, which is comforting.

Does this make sense. The numbers all point to yes, but I don’t know if I’m missing something.

Any suggestions?
FYI – I do have a separate Simple IRA for my retirement. This is to augment my retirement with an available cash reserve.
Sorry for sross posting. Personal finance seemed to be dominated by 13 yr olds so I posted in another category.

I realize there is risk in this plan. But there’s also risk in having 300k of equity doing nothing. If I have an opportunity to do something with that 300k @ 5% interest, it seems that half of that can start doing some work for me (in addition to appreciating with my home’s value).

I don’t mean to sound overly optimistic. If you knew me, you’d know I’m as pretty conservative. The numbers just make complete sense. 8% is not a lofty goal for an average return on a mutual fund (over 5-10 years).,

If you’ve looked at the numbers, why is this bad. I can afford $ 2000/mo payments. In 10 years, this starts to completely pay my mortgage. How is that bad?

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