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Well, that is just a gamble. You would be taking a risk to assume you can make good investments and not loose money. The world economy is a mess, baby boomers are retiring and just beginning to sell off stocks and take 401k distributions (more stock sell offs) and many other factors that this economy has never seen.
If you're basing your investment advice on the fact that the last 30 years have been good so the next 30 will be even better, you might have a rude awakening.
Personally, its not worth the risk. Not in this economy. Not for your primary residence.
No, it isn't all about it. But it's a good tax break and will help build her credit. And she can take out a 15 year mortgage or pay off the mortgage early, anyway.
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It's about the yield of that money ($Y) invested for X years.
Obviously. Still, it's not a great idea for someone so young to pay total cash for a house, IMO. She can do that when she's closer to retirement (and some would say that even then, it's a good idea to keep a small mortgage).
If you buy and hold high-quality stocks, you will ride out any ups-and-downs in the market place. Will Exxon continue to make money? Will Coca-Cola? That answer is 'yes'. Unless the whole system falls apart, in which case where she's put her money will be the least of her worries. If you're betting it will fail, then buy lots of canned goods and head for the hills.
If she plays the markets, the odds of losing it all are high. But that's not 'investing'...that's gambling.
Putting all her eggs into a basket marked 'house' will limit her options and leave her with little ready-cash to answer the inevitable needs/wants that arise. You might be able to use the house for collateral for a loan if a bank agrees that what you want the money for is worthwhile...but why not just keep some cash on hand? There may be opportunities approaching that she will not be able to take advantage of without ready cash.
If I were in her shoes -- or my daughter was -- I'd make a large down-payment. As much as 50%. Her mortgage will be less (and the point about improving credit is a good one) and she'll still have plenty of cash-on-hand. If she had repairs to make or changes she wants, she'll have the money to do what's needed immediately. And if she loses her job or her health goes south, she won't be wondering why left herself house-poor.
If you buy and hold high-quality stocks, you will ride out any ups-and-downs in the market place. Will Exxon continue to make money? Will Coca-Cola? That answer is 'yes'. Unless the whole system falls apart, in which case where she's put her money will be the least of her worries. If you're betting it will fail, then buy lots of canned goods and head for the hills.
If she plays the markets, the odds of losing it all are high. But that's not 'investing'...that's gambling.
Putting all her eggs into a basket marked 'house' will limit her options and leave her with little ready-cash to answer the inevitable needs/wants that arise. You might be able to use the house for collateral for a loan if a bank agrees that what you want the money for is worthwhile...but why not just keep some cash on hand? There may be opportunities approaching that she will not be able to take advantage of without ready cash.
If I were in her shoes -- or my daughter was -- I'd make a large down-payment. As much as 50%. Her mortgage will be less (and the point about improving credit is a good one) and she'll still have plenty of cash-on-hand. If she had repairs to make or changes she wants, she'll have the money to do what's needed immediately. And if she loses her job or her health goes south, she won't be wondering why left herself house-poor.
How do you know the OP won't have significant cash even after the purchase?
But it's a good tax break and will help build her credit.
Credit scores are only good for people who like to pay interest. If you have a large inheritance and/or live within your means, you will never need to apply for credit, ever again.
I say with mortgage rates so low, I lean toward borrowing for a mortage and using my money to make me money.
So, would you remortgage your home or do a HELOC and take all that money and put it into the stock market? With your train of thought, you can't loose eh?
So, would you remortgage your home or do a HELOC and take all that money and put it into the stock market? With your train of thought, you can't loose eh?
Aren't HELOC repayment periods either MUCH shorter or the interest rates MUCH higher? That makes it much riskier, but if I could lock in 3.5% over 30 years, I'd do it.
Last edited by Mr. Zero; 04-06-2013 at 08:42 AM..
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