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Old 11-11-2007, 11:19 AM
 
238 posts, read 1,062,299 times
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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?
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Old 11-11-2007, 11:48 AM
 
Location: NC
119 posts, read 510,146 times
Reputation: 103
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.
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Old 11-11-2007, 12:28 PM
 
Location: Marion, IN
8,191 posts, read 28,828,534 times
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Just me, but I would pay cash. I have had it both ways and I like the security of not having a mortgage.
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Old 11-11-2007, 12:32 PM
 
Location: Fort Worth, Texas
10,739 posts, read 32,608,019 times
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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.
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Old 11-11-2007, 12:47 PM
 
Location: Northern NJ
979 posts, read 2,729,882 times
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Quote:
Originally Posted by Evey View Post
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 View Post
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.

Good luck and seek professional guidance.
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Old 11-11-2007, 12:49 PM
 
1,174 posts, read 6,451,472 times
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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.
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Old 11-11-2007, 12:53 PM
 
1,174 posts, read 6,451,472 times
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Quote:
Originally Posted by Lindsey_Mcfarren View Post
From what I understand, this option is not available if your home has a mortgage.
Not true. You can put your house in Revocable Living Trust if it has a mortgage. It's done all the time, and we did it in the past.
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Old 11-11-2007, 03:28 PM
 
Location: CA
2,464 posts, read 5,965,585 times
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Quote:
Originally Posted by goodtype View Post
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..
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Old 11-11-2007, 04:41 PM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,568,776 times
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also remember that you have to pay high property taxes & homeowner's insurance for a home that's worth 300k
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Old 11-11-2007, 04:52 PM
 
Location: Tucson
42,835 posts, read 81,147,429 times
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Quote:
Originally Posted by goodtype View Post
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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