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Buy house in cash, or mortgage?

Uppsala9496

Uppsala9496

Diamond Member
Hypothetical home buying question:

If you had enough cash to buy a house for $260,000 would you outright buy it, or would you put a 50%+ down payment and mortgage the rest for 15 years?

Taxes would be about $6,000 a year.
 
Probably mortgage unless you can't find a way to make more than 3% on that money.

And why do taxes matter?
 
Depends on your total net worth. If that $260k is most of your cash or liquid asset, I would do the 50% down or less. If you have like $500k cash, then I would pay 100% cash and skip the mortgage.
 
Based on a subjective cost-based analysis of the area I would probably end up putting down enough to avoid PMI and using a 30 year for the remainder. Using bi-weekly payments would add an additional monthly payment a year and reduce the interest payments over the course of the loan, which statistically I'm not likely to have longer than 3-5 years before moving again either way.

Overall, it's fiscally illogical to spend any more than you have to if you are getting PMI anyway, so the difference between that 3-5% and the 20% are irrelevant. So, avoid PMI or pay the bare minimum if you can't.

I would invest the rest. Relying on equity has shown to be outdated and untenable in our current economy.
 
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Depends on interest rate of mortgage and how much you can make on the money elsewhere. Seems simple, but throw in variable mortgages, market performance, asset appreciation and... ???
 
Cash.

I paid off my house (had 5 year loan) that I use as a rental property last December. It is so nice knowing that if I lost my job or anything I had a place to live that I could easily pay the taxes + bills on a McDonalds minimum wage salary. The peace of mind was well worth it. Now I take that rent money and invest it in stocks. I can sell the house if I run into trouble, and not be in any trouble at all. And then of course pull my money out of stocks.

There is no way I'd ever choose to pick a mortgage in the future if I had the means to avoid it.
 
Based on what I learn from HGTV Flip or Flop (I watch that with my wife) you buy house in cash, renovate it in 30 days on a 30k budget. List on the market for 200k higher than what you bought it for. Flip it. Make 100k profit and then take the money you make and buy another house in cash and start the process again.
 
dn7309 said:
Based on what I learn from HGTV Flip or Flop (I watch that with my wife) you buy house in cash, renovate it in 30 days on a 30k budget. List on the market for 200k higher than what you bought it for. Flip it. Make 100k profit and then take the money you make and buy another house in cash and start the process again.
Click to expand...

Basically sums up my childhood. My dad would do this over and over. We lived in the same general area the entire time, but we moved twelve times before I even hit 18 lol.
 
brandonb said:
Cash.

I paid off my house (had 5 year loan) that I use as a rental property last December. It is so nice knowing that if I lost my job or anything I had a place to live that I could easily pay the taxes + bills on a McDonalds minimum wage salary. The peace of mind was well worth it. Now I take that rent money and invest it in stocks. I can sell the house if I run into trouble, and not be in any trouble at all. And then of course pull my money out of stocks.

There is no way I'd ever choose to pick a mortgage in the future if I had the means to avoid it.
Click to expand...


This. If you are dead set on investing money, you can take out a loan/mortgage on the house, and like others have said, if you can find an investment that pays a worthwhile amount higher than your APR, then invest.

I always assume the cost of living is going up, so I would rather not burden myself with another payment. But to each his own.
 
I vote cash. Any monthly paycheck from a job is yours + holds you over if you lose your job.
 
On topic, with the current rates hovering around 4.25% for 30 years, and with all the deductions you get from carrying a mortgage, further reducing your effective mortgage rate, it makes sense to put 20% down and invest the rest. As long as mortgage rate is lower than expected/historical market returns it's always better to finance and invest the left overs.
 
It is interesting to see the responses. Half say carry the mortgage and invest whilst half say pay cash.
15 year mortgage is what, 3.5% or so?

Hadn't thought of the tax deductions for carry a mortgage that fleshconsumed brought up.
 
Uppsala9496 said:
It is interesting to see the responses. Half say carry the mortgage and invest whilst half say pay cash.
15 year mortgage is what, 3.5% or so?

Hadn't thought of the tax deductions for carry a mortgage that fleshconsumed brought up.
Click to expand...

Tax deduction is only helpful if you itemize. Depending on the amount, it might not help you if it's below the standard deduction.
 
Uppsala9496 said:
It is interesting to see the responses. Half say carry the mortgage and invest whilst half say pay cash.
15 year mortgage is what, 3.5% or so?

Hadn't thought of the tax deductions for carry a mortgage that fleshconsumed brought up.
Click to expand...

I think a lot of people put more value in the peace of mind that comes with having no mortgage.
 
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