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If you can afford to carry the mortgage... do so.
Do *other* responsible things with the rest of the cash.
WHY ON EARTH!!!!!
She said she had enough for cash for the house WITH 10 years of expenses covered after that!
Many people who get a large chunk of money blow through it and have nothing left. This way her husband (through wisely buying life insurance) is assured through her home purchas that his wife and child always have a roof over their heads.
I would agree however that it would probably be best not to make any decisions till some time has passed...
I'm so sorry for your loss. I honestly don't think there's a right or wrong answer given the information you provided. I know you mentioned the purchase price is 30-40% of what's in the bank now but I can't really project much without putting dollar figures around approximate property taxes, mortgage interest, your current salary, retirement funds etc.
I personally would avoid financial advisers but if you really feel you need one, select a well respected fee-based adviser rather than commission based. As Chet mentioned above, you need to do your own due diligence to find out what sort of adviser your current family friend is. Unfortunately, you not only need to protect yourself against financial advisers, but also from any number of other people who might try to take advantage of your financial position and recent loss.
If you don't have a CPA, I would ask around, find a capable one and set up an appointment immediately. You're going to need one to help with your tax filing come next year. You can file jointly ($12,200 standard deduction) or separately in the year your spouse passes and as a "Qualifying widow with a dependent status" ($12,200 standard deduction) for 2 years following the death of your spouse so you need to weigh how those standard deductions affect your mortgage/property tax deductions.
I would also seek out a qualified estate planning attorney to help you draw up necessary papers to help you legally protect your child should something happen to you. And please do not use one of those online do-it-yourself methods to prepare wills, living revocable trusts, medical decisions etc. Those self help documents will end up costing your heirs more after the fact should you pass.
These folks will ultimately help you figure out a number of answers regarding finances and offer some suggestions tailored to your financial needs. My condolences once again.
Jersey,
I am so sorry for your huge loss.
Right now it's as if your looking at the world through colored glasses, isn't it?
Stay where you are.
You really don't know what you want to do, and until you are absolutely
sure, stay where you are.
There is nothing wrong with renting and trying to get through your life now
for yourself and your child adjusting to the tremendous loss you have suffered.
Do nothing for now, because you can.
Time does clear your head, and right now, you have to give yourself time.
Greave in your time and in your own way, don't let other people in your life
rush you about anything.
You won't have any financial difficulties at this time if you stay where you are and rent
and work and deal with learning to live without your husband.
One day at a time, that is how you have to take it.
When you are ready, IF you feel buying is what you really want, then and only
then should you buy a home cash. CASH.
Why?
Peace of mind.
You of all people know that you never know what is going to happen in life.
My condolences again.
She said she had enough for cash for the house WITH 10 years of expenses covered after that!
Many people who get a large chunk of money blow through it and have nothing left. This way her husband (through wisely buying life insurance) is assured through her home purchas that his wife and child always have a roof over their heads.
I would agree however that it would probably be best not to make any decisions till some time has passed...
that is why i generally like to see the mortgage paid off if owning a home outright was a goal.
to often folks reach their goal of owning their house outright and instead of meeting that goal and taking the money out of the risk pool they instead let greed put the carrot on the stick.
they let their greed go for higher returns than the mortgage and many fail and end up with no payed off home and little gains or losses on their attempt to do better.
follow your personal goal and don't let greed direct you.
What do you suppose the average net worth of the posters on Boggleheads is? Do you think it's more than Mr. Ramsey's MILLIONS? I think not. Therefore, choose your adviser based upon THEIR successes, not on rhetoric.
What do you suppose the average net worth of the posters on Boggleheads is? Do you think it's more than Mr. Ramsey's MILLIONS? I think not. Therefore, choose your adviser based upon THEIR successes, not on rhetoric.
20yrsinBranson
John Bogle's ideology is where boggleheads comes from. John Bogle is worth an estimated $4 billion. John Bogle is an actual investor, not some guy who hosts a radio talk show who made his "MILLIONS" selling simple information to some of the most financially stupid people around.
Mr. Ramsey is hardly qualified to be considered an "adviser"
You can look towards the ideology of an actual investor, or a cheap shoe salesman.
What do you suppose the average net worth of the posters on Boggleheads is? Do you think it's more than Mr. Ramsey's MILLIONS? I think not. Therefore, choose your adviser based upon THEIR successes, not on rhetoric.
20yrsinBranson
i would never base who i take advice from based on how much money they made. that would be like taking advice from a broker with alot of money.
SHOW ME THEIR CLIENTS MONEY.
I think that koyosaki made alot of money but he is the last one i would even buy a book from.
I am trying to get a handle on the opportunity cost of having that money "tied up" in the house, as opposed to being invested, earning interest/compound interest, etc. I just don't know if the money, if invested and saved instead of put toward the house at this point, would earn more than I paid in interest. Most likely not? The tax deduction probably closes the gap to some extent, but it's just so hard to tell.
You are right to think in terms of opportunity cost - but most likely, you will earn more by investing.
The opportunity cost of all-cash real estate purchases is generally high, and low interest rates make it higher. Savvy real estate buyers will take out mortgages even when they are flush with cash because they understand this.
It is the financially unsophisticated that will tell you all debt is bad no matter what, and that if you have the cash, why would you possibly want a mortgage?
You have to be comfortable actually investing though. Savings alone will not suffice. You will want a good, balanced stock/bond portfolio.
An effective strategy here would be to take out a mortgage, invest the cash, and let the dividends/interest income fund your mortgage payment. This way, you pay unearned tax rates on dividends, and get to deduct your mortgage interest at ordinary rates. Plus your money is invested.
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