financing conondrum - what would you do and why (funds, pay, rate)

[ajcorpus]

Wife and I agreed on a house and wanting to move forward with the process. House is 300k. We are split with me want to go with scenario 1, wife with scenario 2:

1: Put in 60 k downpayment and finance 240 k. Result in monthly mortgage payments of $ 1128 at a rate of 3.875%. End up paying $466,080 with a 30 year loan.

2: Put in 160K downpayment and finance 140 k. Result in monthly mortg. payments of $658 at a rate of 3.875% (this is 470$ of extra savings every month compared to scenrio 1). End up paying $396,880 over 30 yrs - Which is esentially 69 k of savings over 30 yrs - which is $2300/yr - $192 per month.

I feel like scenario 1 leaves us with an extra 100 k that we could use for other investments - what ? Not decided. Maybe rental property - maybe stocks. Point is I will have 100k extra to invest. Any one who had similar situation or maybe just some words for the wise please let me know of you think should be a better finacial move and why. I appreciate your time, as always.
Thanks.
PS: I know there is a third scenario out there (160k down, pay extra every month) - but for reasons i would rather not go over - dont want to consider that scenario at this point.

[CSD610]

Why not look for a home you can pay cash for have no mortgage then use the money you would have paid toward the monthly mortgage payment to rebuild your savings quickly and start investing with portions of that?

[Racks]

Putting the investment angle aside, with that great interest rate I would be putting the LEAST I could down on the house as possible.

[Lowexpectations]

If you want to pay off your mortgage put the larger amount and go 15 year. If you want to pay it off while still having flexibility go max down on a 30 year and make the same payment as the 15. If you are going mad down you should have an addtional 6 months savings after the downpayment.

We are in a 5/1 io arm but putting the equivalent of a 15 year fixed payment into savings

[King_of_DC]

Originally Posted by ajcorpus

Wife and I agreed on a house and wanting to move forward with the process. House is 300k. We are split with me want to go with scenario 1, wife with scenario 2:

1: Put in 60 k downpayment and finance 240 k. Result in monthly mortgage payments of $ 1128 at a rate of 3.875%. End up paying $466,080 with a 30 year loan.

2: Put in 160K downpayment and finance 140 k. Result in monthly mortg. payments of $658 at a rate of 3.875% (this is 470$ of extra savings every month compared to scenrio 1). End up paying $396,880 over 30 yrs - Which is esentially 69 k of savings over 30 yrs - which is $2300/yr - $192 per month.

I feel like scenario 1 leaves us with an extra 100 k that we could use for other investments - what ? Not decided. Maybe rental property - maybe stocks. Point is I will have 100k extra to invest. Any one who had similar situation or maybe just some words for the wise please let me know of you think should be a better finacial move and why. I appreciate your time, as always.
Thanks.
PS: I know there is a third scenario out there (160k down, pay extra every month) - but for reasons i would rather not go over - dont want to consider that scenario at this point.

Sounds like your two options are not ideal, which is why you can't make a decision... neither one is really better than the other. 1. Investments fail, wife looking at you crazy. 2. Medical issue, etc, you left in financial ruin.

What am I doing? I did not put all money down... saved some in relatively safe investments in case I need the money. Personally, I think the best plan is to pay a house with cash though. I'll wait maybe two years before paying off my house.... Maybe earlier since I'm also making some business investments.

I like your idea of keeping some cash... depends if you can make the investments work in your favor. I'll admit, I have trouble with risk at times... not taking any can hold one back and not allow your money to work for you. But you can also lose it all on what you think is a "sure thing". Been there....

Why not compromise? Finance 200k and invest the rest. That way you're both equally (un)happy and no one's holding it over the other's head if investments go south or do really well.

Originally Posted by CSD610

Why not look for a home you can pay cash for have no mortgage then use the money you would have paid toward the monthly mortgage payment to rebuild your savings quickly and start investing with portions of that?

Maybe he doesn't have 300k and lives in an area where that's what's required to get a decent place.

[Jaggy001]

The financing decision should be driven by 1) how much is the financing costing you and 2) what return can you get for your own capital if you do not use it to finance the home.

For example, we chose to finance a house we bought because 1) we got a fixed 15 year mortgage at 3.125% and 2) we felt we could do better than 3.125% having our money invested elsewhere.

[FireFly2]

I hate debt. I would do option #2, but would do a 15 year mortgage.

[midwestlaxer]

I agree with putting the least down as possible. I would pay cash for a different property...rent it out and use that money to pay down your mortgage on your primary residence. We don't know your situation (age/income/handiness), so this might not be a viable option.

Great time to take advantage of the low interest rates.

I have never been a big fan of idle lazy dollars, instead make your money work for you. Just my $.02.

[ncole1]

Originally Posted by ajcorpus

Wife and I agreed on a house and wanting to move forward with the process. House is 300k. We are split with me want to go with scenario 1, wife with scenario 2:

1: Put in 60 k downpayment and finance 240 k. Result in monthly mortgage payments of $ 1128 at a rate of 3.875%. End up paying $466,080 with a 30 year loan.

2: Put in 160K downpayment and finance 140 k. Result in monthly mortg. payments of $658 at a rate of 3.875% (this is 470$ of extra savings every month compared to scenrio 1). End up paying $396,880 over 30 yrs - Which is esentially 69 k of savings over 30 yrs - which is $2300/yr - $192 per month.

I feel like scenario 1 leaves us with an extra 100 k that we could use for other investments - what ? Not decided. Maybe rental property - maybe stocks. Point is I will have 100k extra to invest. Any one who had similar situation or maybe just some words for the wise please let me know of you think should be a better finacial move and why. I appreciate your time, as always.
Thanks.
PS: I know there is a third scenario out there (160k down, pay extra every month) - but for reasons i would rather not go over - dont want to consider that scenario at this point.

It would depend on the rest of your assets and your age. If a large down payment would make it difficult to have a lot of equity investments, you probably should trim it down. But we're not talking about retirement accounts here (you can't put in that much in one year). I'd thus assume the money would be for nearer term goals (what would these be?)

If your alternative is a rental property, you should avoid it unless you have a similar amount of assets in equities (stocks). Too much real estate and not enough stocks is undiversified.

Having a larger mortgage to invest in stocks for long term purposes (> 10 years) makes sense at such a low mortgage rate. However, don't go much into bonds since you'd get a lower rate on them than paying down your mortgage, adjusted for risk.

Finally, if you have kids about to enter college, make a big down payment on your house (but still keep some funds in reserve of course) because home equity is not considered when applying for financial aid!