need financial advice with regards to a mortgage

[spaceman]

my basic question is:
if you can afford a larger downpayment than 20%, or just buy outright are you better off?
buying outright weve been cautioned agaisnt..
but is there something similar to a passbook loan to borrow agaisnt the money you have?(for a better apr)
are there other non tradtional loans that would be better suited to this situation?
pm me if you have some knowledge in this area.(if you would)
if nothing else, i might entertain you.


8i know banks will provde this info, but im looking for an unbiased source.

 

[kranky]

Are you asking whether you should take a mortgage even if you could buy the house for cash?

 

[Modeps]

Originally posted by: kranky
Are you asking whether you should take a mortgage even if you could buy the house for cash?

That's what it sounds like to me...kind of. Put down as much as you feel comfortable with. Remember that the more you put down to start off with, the less monthly payments will be. If you can buy it outright, why not do so? The only thing you'll have to pay year to year is property tax and insurance...

 

[spaceman]

Originally posted by: Modeps

Originally posted by: kranky
Are you asking whether you should take a mortgage even if you could buy the house for cash?

That's what it sounds like to me...kind of. Put down as much as you feel comfortable with. Remember that the more you put down to start off with, the less monthly payments will be. If you can buy it outright, why not do so? The only thing you'll have to pay year to year is property tax and insurance...

it would take almost all of our funds to do this.
leaving little to no wiggle room in terms of a financial cushion.

 

[kranky]

In that case, take out a mortgage. You do not want all your money tied up in an illiquid asset such as a house. You still need to have savings, an emergency fund, etc.

Remember that you can always pay extra towards your mortgage to pay it off sooner.

How long do you plan to own the house?

 

[spaceman]

Originally posted by: kranky
In that case, take out a mortgage. You do not want all your money tied up in an illiquid asset such as a house. You still need to have savings, an emergency fund, etc.

Remember that you can always pay extra towards your mortgage to pay it off sooner.

How long do you plan to own the house?

the foreseeable future:7-10 yrs?

 

[Midlander]

Take out a mortgage. Money is cheap right now and you can get a better average return in the stock market. Remember to use mutual funds and spread the money between sectors: small and large firms, US and international, etc. You're much better off in the long run.

 

[boggsie]

Please clarify if you don't mind; the coffee hasn't fully kicked in on this end.

You have enough to buy the house outright, but it will leave you with little or no savings?

 

[boggsie]

Don't get sucked down this path, unless you are willing to work with a financial advisor. You have posted the question here, which leads me to believe that you wouldn't be a good financial advisor with your own money and you risk dumping your 'nest egg' down the toilet.

Originally posted by: Midlander
Take out a mortgage. Money is cheap right now and you can get a better average return in the stock market. Remember to use mutual funds and spread the money between sectors: small and large firms, US and international, etc. You're much better off in the long run.

 

[spaceman]

Originally posted by: boggsie
Please clarify if you don't mind; the coffee hasn't fully kicked in on this end.

You have enough to buy the house outright, but it will leave you with little or no savings?

more or less, the house is a relative bargain, the seller is listening to any and all offers.yes it would decimate most of our savings.

 

[boggsie]

Originally posted by: ncircle
my basic question is:
if you can afford a larger downpayment than 20%, or just buy outright are you better off?

This can be a very complex question to answer as it depends upon many factors, including your tax bracket and level of comfort with investment risk.

Originally posted by: ncircle
buying outright weve been cautioned agaisnt..

Yes, because banks don't stand a chance of making money off of you, if you don't have a mortgate. Just remember, they are in business to make a profit and help their account holders, to the extent that it doesn't hurt their ability to make a profit.

Originally posted by: ncircle
but is there something similar to a passbook loan to borrow agaisnt the money you have?(for a better apr)

These do exist and they can make sense, depending upon your tax bracket and age (ability to handle risk) and need for liquidity in your portfolio.

Originally posted by: ncircle
are there other non tradtional loans that would be better suited to this situation?
pm me if you have some knowledge in this area.(if you would)
if nothing else, i might entertain you.

8i know banks will provde this info, but im looking for an unbiased source.

 

[boggsie]

Originally posted by: ncircle

Originally posted by: boggsie
Please clarify if you don't mind; the coffee hasn't fully kicked in on this end.

You have enough to buy the house outright, but it will leave you with little or no savings?

more or less, the house is a relative bargain, the seller is listening to any and all offers.yes it would decimate most of our savings.

It it good that you are asking questions, then. There are many factors that will influence your decision.

How comfortable are you with the real estate market in that area? Consult a realtor and see if you can get the MLS records of (similar) properties that have turned over multiple times in the past ten years. The appreciation of these properties as they were bought and sold will give you some indication of the appreciation that you can reasonably expect in the next ten years.

Is there room for new development in the surronding areas? If so, this may make it very difficult for you to sell, if this land is developed and comes on the market at the same time you are looking to sell. On the flip side, if the market is booming and new development is going very fast, then it can result in an unexpectedly high rate of appreciation in existing homes, which would be good for you.

You are probably disciplined, or else you wouldn't have been able to save such a large nest egg. If you are good savers, than the capital you have set aside should be relatively safe. I generally caution young investers against keeping large sums of cash in liquid accounts, because it generally creates a temptation to splurge on a new couch, a new this or that and 18 months later, the shine of the new stuff has worn off and the cash is gone.

If the cash is from a windfall and you are not good savers, then I would recommend putting all but 3-months of living expenses into the property and never open an envelope advertising a home equity loan. This isn't about sound investment advice, this is about staying out of debit!

I am sure that there are many who could go on and on regarding this. It is a catch-22 as there are very sound paths to take on either side of the discussion. It all comes down to personal discipline, trust in the stock/bond markets and tax bracket.

You really need a reputable and trustworthy financial planers advice and you need to be VERY honest with this person regarding your tendencies for spending, etc.

 

[kranky]

You have a nice chunk of savings now, which is great. I'm assuming that your savings is for long-term purposes.

What I'd do based on what you told me is to put down 20% so I could get a good mortgage rate.

I would have 80% of the savings invested for the long-term, in a mix of mutual funds. Research "asset allocation" at a site like Vanguard.com to see how that is done. The right allocation for you will depend on your age, your tolerance for risk, and your long-term investing goals.

The rest I would keep in short-term savings like CD's or money market funds so you have money available to make any repairs and for an emergency fund.

Then I'd pay extra on the mortgage to get it paid off sooner. I don't like being in debt myself. With the amount of savings you've accumulated, I'm assuming you could easily handle paying extra on the mortgage. That will save you a lot down the road, especially if you can do it right from the start.

Yes, you could pledge your savings to get a secured loan and therefore maybe get a better rate than a mortgage, but would you still be able to have it invested the way you want for your long-term goals? I don't know if that's possible. You certainly don't want your savings tied up in a bank CD for years and years just to save a few dollars on a mortgage loan. What you would lose in the long term wouldn't be worth it.

My recommendation is based on the theory that your investments will grow at a faster rate than your mortgage loan rate. In the long term, that's almost certain to be true, although there are no guarantees. You want your money working for you through investments instead of being all tied up in your house, which isn't a liquid investment. You'll still benefit from any appreciation in the value of your home.

By all means, consult a financial advisor for an additional point of view, but you still need to learn about investing yourself. No one cares as much about your money as you do.

 

[boggsie]

Originally posted by: kranky
No one cares as much about your money as you do.

Truth meter goes off of the scale!!

Question everything so that you understand. Being humble is a good thing. If anybody says "trust me" because they don't want to answer your questions to the extent that you clearly understand, politely move along to the next person on your list.

 

[tm37]

Iread a thing that for most people that have alot of money they also have huge morgages. They could easly pay off the morgage but they do not.

They have found that 4% is cheap for money. REALLY CHEAP!

I would look at pgetting an arm (that is nothing) or if you want to just have a cusion what my folks did was buy the house outright and then got an equity loan (at like 2%)

 

[Vic]

Originally posted by: kranky
You have a nice chunk of savings now, which is great. I'm assuming that your savings is for long-term purposes.

What I'd do based on what you told me is to put down 20% so I could get a good mortgage rate.

I would have 80% of the savings invested for the long-term, in a mix of mutual funds. Research "asset allocation" at a site like Vanguard.com to see how that is done. The right allocation for you will depend on your age, your tolerance for risk, and your long-term investing goals.

The rest I would keep in short-term savings like CD's or money market funds so you have money available to make any repairs and for an emergency fund.

Then I'd pay extra on the mortgage to get it paid off sooner. I don't like being in debt myself. With the amount of savings you've accumulated, I'm assuming you could easily handle paying extra on the mortgage. That will save you a lot down the road, especially if you can do it right from the start.

Yes, you could pledge your savings to get a secured loan and therefore maybe get a better rate than a mortgage, but would you still be able to have it invested the way you want for your long-term goals? I don't know if that's possible. You certainly don't want your savings tied up in a bank CD for years and years just to save a few dollars on a mortgage loan. What you would lose in the long term wouldn't be worth it.

My recommendation is based on the theory that your investments will grow at a faster rate than your mortgage loan rate. In the long term, that's almost certain to be true, although there are no guarantees. You want your money working for you through investments instead of being all tied up in your house, which isn't a liquid investment. You'll still benefit from any appreciation in the value of your home.

By all means, consult a financial advisor for an additional point of view, but you still need to learn about investing yourself. No one cares as much about your money as you do.

Good advice. :thumbsup:

Put 20% (plus closing costs) down on the house and take out a low-cost mortgage for 80%. Tying up all your assets in the house is not terribly wise. Remember that a mortgage is typically the cheapest form of long-term financing possible, and is tax deductible (which further reduces the net cost of the financing). In addition, maintaining a certain level of liquidity in one's assets is IMO crucial to weathering the occasional financial storms in life.