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If I was able to sell my home I would expect about a $300K profit after paying the real estate commission and all taxes and fees. That would leave me with $300K in my bank account. If I moved to a City that had less expensive homes and bought a new home for $300K, should I get a mortgage? I would be working part time semi retired in the new town expecting to earn about $1000 a month.
Would it be better to pay for the new house in cash, or get a mortgage?
There are pros and cons for each, if you pay in cash then you don't have to worry about paying interest that you would if going through a mortgage, if you get a mortgage then you can invest that money and potentially make (or lose) a lot, mortgage has the tax benefits but they don't make up the full cost of the interest on the loan, etc.
If you pay for your house in cash, you can put your house in a trust as well. From what I understand, this option is not available if your home has a mortgage.
Just me, but I would pay cash. I have had it both ways and I like the security of not having a mortgage.
Quote:
Originally Posted by Lindsey_Mcfarren
If you pay for your house in cash, you can put your house in a trust as well. From what I understand, this option is not available if your home has a mortgage.
-- There is also similar security in having a mortgage and having the cash available to pay it off.
-- There are innumerable types of trusts. And, you can put mortgaged property in many, many trusts.
This is an emotional and economic decision. You should speak with a professional financial advisor, your accountant, etc. and see what is best for your situation. Then you can make an educated decision based upon ALL OF THE FACTS, DATA, and so on. You can also then make an emotional decision if you wish, but you will know exactly what the costs are, including the hidden costs.
I'd say it depends on your stage in life, whether you're looking at opportunities with investments or if you'd rather have security. If you want opportunities, with them come risk. The greater the possibility of return, the greater the risk you take. If you're willing to take risks, get a mortgage and invest the difference
If you are a the point in your life where security is more imporant, don't take a mortgage. Simply pay for your home in full. After that, the only things you have to pay for are the property taxes and maintnenace.
Which way is appropriate for you? I don't know and I don't think anybody else can give you that answer. Only you know. Only you know your income. Only you know you ability to keep working or how your retirement income is going to play out. Only you know your own aversion to risk, or willingness to comfortably take risk. Finally, only you know how much time you have left to make back any investment losses if you do take risks and the investments fail.
It's the answers to questions like I've listed that dictate overall investment profiles for everyone. Commonly, the answers show that higher risks, and higher potential returns, are appropriate for younger people because they have the time and earning years ahead of them to make back any losses. Conversely, the answers for older or retired people tend to lead them to taking less risks because their main earning years are behind them, they have already saved and established a portfolio of investments over those years, and they have fewer years ahead to make back any losses they might incur through risky investments.
So again, what point are you in? Only you can tell.
However, I will offer you one example. My wife and I had many mortgages throughout the years. Today, we have none. We recently bought a house and paid cash for it because we wanted the security as we age. That was more important to us than spending a dollar (mortgage interest) to save 40 cents (tax payments).
Actually saving taxes via the mortgage deduction only works when the excess dollars, that wern't spent on the house, are instead used in another investment. That's called leverage, which incrases your return if the investents work out. Otherwise, it's just spending a $10 bill to get $5 back. It dosn't make sense.
So again, do what works best for you,both financially and emotionally. That's my suggestion.
If I was able to sell my home I would expect about a $300K profit after paying the real estate commission and all taxes and fees. That would leave me with $300K in my bank account. If I moved to a City that had less expensive homes and bought a new home for $300K, should I get a mortgage? I would be working part time semi retired in the new town expecting to earn about $1000 a month.
Would it be better to pay for the new house in cash, or get a mortgage?
I personally would not use all the money to pay off the mortgage. My husband and I are in the process of selling a rental that we lived in less than 2 years ago (we're selling it to avoid cap. gains tax). We should net around 200K. We are splitting it into thirds and buying another rental property, paying down part of our mortgage in our primary home, and investing the rest for our kids college/retirement/emergency funds. We like to spread our money around, even if it means we have a mortgage payment (we are refinancing after we pay it down). But it depends on where you are in life and how close to retirement you are...
Last edited by mommabear2; 11-11-2007 at 03:38 PM..
If I was able to sell my home I would expect about a $300K profit after paying the real estate commission and all taxes and fees. That would leave me with $300K in my bank account. If I moved to a City that had less expensive homes and bought a new home for $300K, should I get a mortgage? I would be working part time semi retired in the new town expecting to earn about $1000 a month.
Would it be better to pay for the new house in cash, or get a mortgage?
I'd say it also depends on what other savings you have. Should an expensive emergency arise, it's not the best idea to have all your money tied up in a house.
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