Posted on 01/14/2024 11:49:06 AM PST by where's_the_Outrage?
Let's be honest: While I intend to buy a house next year, and have just met my savings goal to make it happen, I'm not capable of paying cash for the entire purchase. Instead, I'll be shopping around with the best mortgage lenders and financing my home purchase (except for my down payment).
But in some alternate universe where I have more money to throw at a home purchase, I still wouldn't buy a house outright in cash. Here's why -- as well as you might want to think twice, too.
1. A home is not a liquid asset While you may lose money in the process of converting stock shares to cash (if you have to sell at a time when values are down, for example), it's a fairly straightforward process to turn these into money if you need it.
2. I could likely earn a higher return by investing This point is much less effective given that mortgage rates are at their highest level in over 20 years, but it still bears discussing.
3. I might not have money left over The final reason I wouldn't pay cash for a home purchase is that I wouldn't want to tie all my money up.....
Sinking all your spare cash into a home purchase could have you scrambling for cash for emergencies and missing out on the chance to invest and earn a higher return. Consider all your options for buying a home, and make the decision that's right for you and your finances.
(Excerpt) Read more at msn.com ...
Not really as I wasn’t investing. The 1st was an adjacent property to my primary home, I demo’d the dilapidated existing home and built up the land for parking, play area, garden, and extra garage.
The 2nd was old debt settlement from 30 years ago where I was high bidder on a courthouse auction and am unloading it for more than I paid.
The RISK of housing prices decreasing when you need to sell, are more than offset by the fact you have liquid capital you can use and invest every month that would instead be being spent on mortgage payments.
Whoever wrote this article is either financially ignorant, or a liar.
Yes, leverage lets you buy more with less up front, but do not kid yourself about the risks long term.
What is worse situation? You are forced to sell and lose money on the sale, or you are forced to sell and have to sell it for less than what you owe, then must continue to carry some sort of debt with absolutely NO asset it is tied to.
If you can afford to pay cash for a home, you are always going to be in a better financial position long term than if you are carrying a mortgage, period.
Oh that, Mr. Trump, it’s just a standard clause we put in all our commercial lending products.
You’ll not have any problem as a result of that being included.
Owning a home free and clear is the American dream. Be debt free and have fewer worries. I strongly diagree with his advice.
What with mortgage rates these days, I'd like to know where she thinks that is possible.
[2. I could likely earn a higher return by investing...]
That was my thinking when I built my house in 2018. LUCKILY I listened to my wife and paid cash or we would have had less savings invested And a mortgage now.
The S&P 500 was up 24% in 2023.
“We re-fi’d our mortgage during the last low interest rate cycle and got 2.5% 30 year fixed”
Yes not much in the way of decision making with that low rate. We refinanced three times since 1997 to get it down to our current rate. I just didn’t want to go back to 30 years. Of course principle balance weighs into the decision to pay off, stay put, or re-fi.
I know people who have done it but only under very unusual circumstances. OTOH I don’t recommend borrowing from a bank. Instead, find a fsbo, make a low offer and if they balk, negotiate. Also, write up the agreement before you meet them. As long as there’s a carrot in there (the deposit), they’ll be a whole lot more agreeable than a bank. Nobody has to fix anything to make the deal go through. Nobody has to cut a realtor in, wait for the bank to run out of extra requirements, find a new insurance policy...etc.
But if you have to have a house all pre-tarted up...to each his own. I prefer estate sales and homes the old owners can’t maintain anymore.
These days there are many excellent financial advisers who you can pay by the hour instead of with a percent of your assets.
Try it, you will like it.
;-)
P.S. If you want to see numbers to compare here they are:
https://www.bogleheads.org/wiki/How_much_do_you_lose_to_annual_fees_after_many_years%3F
I’ve always figured the best way to make fixed retirement income go the farthest is to retire with no debt. No mortgage or credit card debt. It’s not always possible but I think it’s a good goal.
That house doesn’t need to be big either. Just a good solid home in safe neighborhood that serves the needs of the homeowner. Most retired people don’t have kids living at home but a spare guest room does make sense. Perhaps a guest room, a hobby room, and a bedroom so 3 bd, 2 car gar should suit most retirees.
One of my favorite things is talk to younger people that find it interesting about consumer finances, especially when they have no clue and are not intellectually curious about them.
My favorite example is the 30/year mortgage.
Borrow 300,000 and pay it off with ZERO interest over 30 years/360 months, equals 833.33 dollars per month or zero interest.
Pay 7% interest for the same 30/year $300,000 mortgage and you pay $1996/month or $718,560 total or $418,560 in interest.
Borrow the same amount $300,000 and pay it off in 15 years or 180 months at 7% for $2696/month or a total of $485,280 or a total of $185,280
Always do what’s best for your finances but paying interest is poison IMO, you may have to do it sometimes, but if you can afford to avoid it, long term it’s the smart decision .
Don’t personally own anything.
Keep 2 legal layers between you and your assets.
Expense everything.
Screwel the Tax Man.
For as long as someone has their mortgage?
I’m reminded of comedian groucho marx.
In the 1950s he built himself a brand new house. The house he would live in the rest of his life. He was advised by friends and acquaintances to take out a mortgage, it would be beneficial when it came to his taxes. But he refused.
Because way back when he was a kid, before he and his brothers went into show business, his whole family was poor and there were times they didn’t have money for the rent. So, when the landlord came around to collect his rent, they’d hide and have to pretend they weren’t home. Groucho hated that and as a result in later years, decided he didn’t want to have to make a mortgage payment every month.
There are many ways to success and they change as we age. Like others, I used debt heavily to make money, but now I just ride the easy waves, it’s all good. I carry mortgages instead of paying on them these days, but I’m selective, dealing with people I know on properties I’ve owned. Waiting and watching a rural land area now, will be fun when the time is right.
We figured we would croak with a mortgage. Strange financial planning, but almost free money is hard to say “no” to.
If you are over 50 and you still have a mortgage, you’re doing it wrong.
Tg word is lose
L O S E
Yep. 24% per year as far as the eye can see. My retirement depends on it. :-)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.