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Right now I have no debt and I rent. When I retire I was going to set aside around $200,000 to pay cash for a home, maybe at an auction. If you were looking to buy a home for that amount, would you pay cash if you had it or would you take out a mortgage and invest that money some other way?
Really depends on your overall situation -- imagine if you have me pension or 401k it would be might stupid to have a fully paid off house and no other sources of income vs if you have a generous pension backed by some organization that can't weasel out of / some unit if government BIG DIFFERNCES...
For most people the cheapest loan you can ever get is a mortgage for a home you live in and the kind of investment opportunities that you forego by not having a $200,000 pile of dough are pretty hard to turn your back on!
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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If you are going out far enough to pick up something for that little, you will just have the tax
payments/insurance and be able to live on your retirement. If you get a loan you can deduct
the interest but you may not need that and it could be eliminated in the future. I have thought about that too, in 10 years or so when I will be in that situation, and will most likely do a compromise. Put down about 50-60% and borrow the rest, keeping some liquid assets
that earn a little interest but are easy to get to.
Right now I have no debt and I rent.
When I retire I was going to set aside around $200,000 to pay cash for a home...
How long will it be until you retire?
And do you KNOW where you'll want to live then?
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If you were looking to buy a home... would you pay cash if you had it
This would require that the purchase amount is no more than 10% of total assets.
If so... then the question comes down to investment return from alternate uses vs security.
There is still a LOT to be said for the security of owning your home.
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or would you take out a mortgage and invest that money some other way?
There are two basic reasons to have a mortgage:
1) You have no choice but to buy that home with a long term loan (or)
2) You have a better use for the cash (the investment return from alternate uses is better)
I do not believe in putting all of my eggs in one basket. I would invest half in buying a nice cooperative in Brooklyn Heights or Prospect Heights. I would put $20,000 in a high interest savings account, aggressively invest $10,000, moderately invest $60,000 and have fun with $10, 000.
To me it makes sense to go ahead and get a mortgage with the supper cheap rates out there. Put in a decent down payment and try to get one around 3% or less (I've seen them). Shouldn't be too hard to safely get 4% or more on your money if placed with an experienced broker or planner.
Money is very inexpensive now as rates are about a 100 basis points over t bills. I would say mortgage the house but it depends on your individual needs.
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