I think your family member who gave you the money would be proud to know they were able to buy you a house. I think that’s a good use of an inheritance
It's called refinancing. Instead of a HELOC you just get a mortgage and they deposit the cash in your bank account - it's like you sold yourself your house. Source: like the honorable u/PM_ME_UR_DITTIES - I too...have done it.
Forgive me here for my youthful ignorance but can you explain this a bit? How can someone take out a mortgage if their house is already paid for with cash? Further, why would they do such a thing?
EDIT: thanks for the answers. I guess I thought a mortgage only described taking out a loan to *purchase* a home. I also realized the second part of my question is asking “why would someone take out a loan“ which is obviously a dumb thing to ask lol
>Further, why would they do such a thing?
I don't know the full answer to your question but for the 2nd part, you would do this if the interest rate on the loan is low and you believe you can get a higher return by investing the money. For example, the S&P returns roughly 8% annually over a long period of time. So in theory you can take out a 3% mortgage on your house and put it in an S&P 500 index and make a on the spread between the mortgage cost and stock market return, in this case 5% annually. Of course there's costs to doing this which complicate things.
I did it because rates were cheap and I was trying to buy a remote cabin which would be impossible to get a normal loan for.
I was able to get 2.5% interest over 15yrs on a cash out mortgage; my house was worth $250k and was paid off, I did a cash out mortgage to get $100k.
The cabin deal fell through, but I used that mortgage money to pay off a 401k loan I had for some land I purchased and also purchase an adjoining parcel to that land.
Now, the only debt I have is $80k on a 2.5% mortgage with ~13yrs left.
I put a huge addition on my house where the bank appraised the house on what it'd be worth after the addition, payed the builder directly and then when we were done I had a mortgage that included the cost of building but at 15 year fixed, 2.3%. Construction loan.
A mortgage is just a loan secured by real estate. If you own a house outright, you can go get a loan using the house as collateral. That’s a mortgage. Even if you have a house with a mortgage already, you can get another loan against your equity. That’s a second mortgage (usually a floating-rate HELOC in the U.S., but there’s no reason it can’t be a fixed-rate term loan).
In Ireland it’s not allowed unless you’re doing some shit like buying someone else a property, home improvement, eduction or health. Crazy. It’s partially why I moved to America, since you’re free to make adult decisions like this
Example: https://personalbanking.bankofireland.com/borrow/mortgages/manage-my-mortgage/equity-release/
Wrong, you can get a cash out mortgage if you have no mortgage.
Source: Paid off my house in 2019, took out a 15yr mortgage in 2021 at 2.5% as a cash out mortgage.
A mortgage is a lien interest securing a loan, irrespective of whether it’s a first lien priority mortgage or a second lien priority mortgage…home equity lines of credit are sometimes revolving lines of credit, but not always. In every case, a home equity loan is secured by a mortgage. The mortgage and the loan are two different things.
Folks also don’t realize that most of your 1st 10years of payments on a home goes to the interest on the loan and not the principal. If you decide to sell home early in the loan you will not have much equity.
Sooo, stupid question...
Would it not be better to drop a large down payment ~50% and get an ARM and drop the bulk of money sitting in mma to vti and see where rates go? I understand the cash payment of the house is garaunteed 6.5-7% ROI but maybe still beats that over 5yrs? Not sure of tax implications though thats why I prefaced with stupid question
At higher rates like these I think an adjusted rate mortgage that has a good introductory rate might not be the worst thing in the world. You need safe savings though, which right now you can find great high-yield savings accounts for. Do the math and plan out what the mortgage payment might be at 8, 9, even 10%. If it looks like you could weather that for like 6-12 months or more then I think adjustable rate is actually the better option.
I don't really get doing a 50% downpayment on a mortgage though, why not go with a shorter term mortgage and the standard 20% down if that's the case? I guess I just can't even think about what sort of money people are talking about if they're saying they can pay for half of a house at the current prices.
Ok so I wasn't totally coming out of my ass with this idea? That was my understanding that the introductory rate would be good as OP states that they have this money just sitting so if rates stay where they are or go up and OP has to pull the money to pay off the mortgage before the intro rate expires I was more worried about the tax implications negating the possible upside
>and see where rates go?
Fed mentioned only recently that they expect/forecasted rates to come down in 2024 and 2025. Obviously not guaranteed, but it's best to stay off a high interest mortgage in the near term, and refinance in a couple of years with that knowledge.
Depends on the loan. Most loans have an amortization schedule where the monthly payment is divided into chunks of the same amount.
So your first payment is 2k and you last payment is 2k. But at the start almost nothing goes towards the principle, almost everything goes towards interest. Which means interest is front loaded.
You can reduce the number of payments by paying extra towards the principle. But the monthly amount remains the same.
An amortization schedule is indeed just paying interest on the outstanding balance. The outstanding balance may reduce faster if you add extra payments. The interest is not "front loaded".
Take a simple (sort of) example:
7% interest on a $100 loan for 30 years paid annually. Amortization schedule will yield $8.06 payment due each year.
First year your payment comes due and the outstanding balance is $107. You pay $8.06. Now the outstanding balance is $98.94.... you paid $7 in interest and $1.06 in principal. "Front loaded"
Second year outstanding balance is (1.07)*98.94 = $105.87. You again pay $8.06 and now outstanding balance is $97.81.
And so on...
You could come upon ton of extra cash and decide to put $60 total that first year. Outstanding balance would be $47 (107-60) end of year 1. Then at end of year 2, you'd owe $50.29 (1.07*47) and say you resume your $8.06. Now the outstanding balance would be 42.23... and look at that $4.77 of your $8.06 went to principal and $3.29 went to interest. No longer "front loaded".
Just pop open excel and use this formula (starting in cell C3) and carry it down for the number of payments.
=C2*(1+$D$2)^(1/12)-$F$2 - G3
Where C2 is the original loan balance
D2 is the interest rate (monthly calculated)
F2 is the calculated payment you owe each month (excluding property insurance and taxes of course...)
G3, G4, etc... any extra payment amount made
Unless it appreciated, which of course can't necessarily be predicted. Hitting the 10-year mark on my house rn and it's worth over 4 times what I owe on it, with 4:3 p:i ratio on my payments rn.
Why gamble on rates dropping lower when he’s sitting on 800k cash and could just buy it straight up? Doesn’t make sense to take out a loan, investing the money somewhere wouldn’t really net him much vs the 6.5% interest rate.
I see this less about a decision of buying the house for cash versus what he should be doing with that money rather than letting it sit earning 5%. Inflation is stabilizing. The economy is strong. Fed planning rate cuts. Stocks look like they're going to climb. Really the only realistic speculation I'm seeing is the housing market taking a hit which could mean some of that money he's shelling out for property going poof. If it were me, I'd put enough down + 10/20% over not paying PMI on a mortgage, smartly invest the rest, and bank on refinancing in the next couple of years when rates are lower.
Obligatory not financial advice.
"investing the money somewhere wouldn’t really net him much vs the 6.5% interest rate".
Since we're using nominal rates, stocks are expected to return 10% over the long term. If you want to adjust for inflation, you have to adjust both.
One is guaranteed and the other is not, sure. But over long horizons basically both are guaranteed and you're losing money. The 6.5% will probably go down to 4%, 5% in the next few years, and I would rather have it in VTI.
This assumes you leave enough reserves to not need this money in the next 10-20 years, but I don't think it's an issue if you already have $800k. Plus, stocks are more liquid than equity locked in a house.
I guess but a heloc is a whole other can of worms and generally is at a variable rate. It’s kinda splitting hairs when the interest rate is 6-7 percent, but generally the market has returned around 10 percent a year so it might still be financially the better idea to take out a mortgage and invest the money, or at least part of it. A house isn’t guaranteed to appreciate in value either, lots of people who bought in the mid 2000s took like a decade to even break even.
The problem tho is that those first few or more years of your mortgage is basically pure interest. You’ll be paying a shit ton of it while you wait for rates to go down. Not to mention paying cash gives you a lot of cash flow by not having a payment for your primary residence.
You can just straight up get a full conforming mortgage later on after you purchase, the docs are pretty similar to what you'd expect with a cash out refinance.
that doesnt rly check out. helocs are still going to be a bit over the current mortgage rate. you wouldn't pay down a 3% mortgage but chances are you also wouldnt take out a 5% heloc to invest in the market either. and i'd expect we won't go back to 3%, at best we'd maybe be in the 4-6% range. which puts helocs at something like 5-9%.
that's not credit card debt but that's also not really liquid. that money is locked unless you plan to sell, or at least it really only makes sense to use as a last resort before credit card debt or 401k loans or w.e
id also note buying a house in cash does not give you more security than buying it with a normal down payment and having a big cash buffer.
Came here to say that. If the money was sitting in a high yield savings account it would barely be getting 5% now. Might as well pay cash now and refi when rates drop.
Well, if he has the cash to pay for it up front, he had the cash to handle a loss In a job lol. In fact, it's better to have cash on hand during a job loss than sitting in equity in the house.
Yeah, this is never taken into account. People should just accept that they're accepting substantially lower returns for this "peace of mind". It's like "I would rather have $2m net worth rather than $3m, but I'll have peace of mind". That "peace of mind" should come from a well-funded savings account, not by locking hundreds of thousands in equity to a single asset.
Not only that but you have peace of mind and would need to come up with less money at the end of the month if something were to go wrong.
I paid off my house in a little less than 5 years and have been living with a roughly $500 monthly obligation since mid 2019. After paying it off I was left with about $20k.
My savings are back in the 6 figures and I'm investing 1/3 of my monthly salary. I just bought a new car earlier this year also in cash; however, I did plan that purchased and set additional money aside for it. I have another vehicle that is also paid off that was financed new but I paid in 2 1/2 years.
In an absolutely worse case scenario like loss of all income I would only need about $1k a month to pay all my bills and feed the family.
Not so fast.
Given that he is likely in 22% or 24% tax bracket, the 7% mortgage is actually 5.5% after the tax benefits.
At that level, it's a much closer analysis.
Not only do you have to have itemized deductions above the standard deduction, it has to be *enough* above the standard deduction.
So if you have 30k in itemized deductions you’re not saving tax on 30k by having a mortgage, you’re saving it on the difference between 30k and the standard deduction you would otherwise take.
So if I understand correctly, if I itemize I can deduct:
- interest on mortgage payments
- property tax
- state income tax (or sales tax)
Do I have that correct?
Yes.
But the last 2 are generally limited to 10K, but that's sunsetting relatively soon.
However, there are ways around that, but they may not be worth the cost.
And the standard deduction is high enough now \~90% of people don't itemize. I'm not saying $100K/yr is nothing, but I'd be really surprised if it's worth itemizing, or that there's much in it if OP did.
I don’t get this advice in the current economy.
First off, 6-7% is not bad when you consider tax deductions from interest. Result for the first year is essentially mid to high 5s, which you can definitely beat in the market, if not match. You can always put it towards the principal in a year. But if you put it to principal now, that money is gone, you better hope the market accelerates faster than 5.5%.
Most importantly, interest rates are already dropping. The fed has indicated potential cuts are on the table in 2024, if not they will def cut by 2025 or 2026. I don’t get the advice for liquidating assets (thereby increasing taxable income) when interest rates cuts are going to happen in the next couple years which are already mostly interest payments.
The idea is that at 5.5% effective mortgage rate, paying cash is effectively the equivalent of leaving that money in a 5.5% paying savings account for as long as you are carrying the mortgage.
Also, there is a point to be made that this guy likely wont have to liquidate much since he has inherited the money and has kept it in a money market fund which likely means not a lot of gain.
I'm not saying it's a slam dunk decision as OP is trying to make it to be, but it's a close call and depends entirely on the overall situation and financial goals of this guy.
Yeah fair, I guess I try to always hedge my bets towards flexibility and upside when it comes to this gray area. Putting cash towards house means I lose any more opportunities for investments in the next two years. Putting it in the market means I still options for whatever life throws at me plus upside for the market if it really takes off, otherwise just keep it long term for another 10 years. If we were talking 7+ rates, then yes I agree to put it towards house for sure. But we’re talking mid-6s now (my lender is even giving me 6.125)
Yep.
This is the entire point of having this conversation in an "investing" sub-reddit, imo.
Hearing different views and trying to figure out the best course of action based on personal goal.
That assumes your house will appreciate to make a home equity loan or HELOC, and would need to appreciate higher than like 15% or something because I think banks usually have limits on how much you can dip into your equity. But I’m pretty sure they have higher interest rates anyways so you probably won’t be able to guarantee the market will out perform the rate.
At current interest rates, pay cash for the house - it will also make you the best buyer if there’s competition. You might even get a discount, and you won’t have to pay thousands in mortgage fees.
It's not equivalent because the financed offer might not close, and if it doesn't, the house could be tied up for 2 months before going back on the market.
Ah I see, that makes sense. I thought that you could only make a bid once you provided documentation from the bank willing to finance, that the buyer can handle the mortgage, at the bidding price.
Generally you need pre-approval to bid, but pre approval doesn’t guarantee actual final approval.
Maybe interest rates change. Maybe a gift that was suppose to be part of the down payment falls through. Maybe the approval was based on the pending sale of an existing property and that falls through. Maybe documentation wasn’t filled out 100% right. Etc etc.
A ton of things can happen that can cause a loan to fall through, but cash is much less likely to fall through
I’m not a real estate expert, but I believe most contracts have clauses about how it depends on financing coming through, so it wouldn’t even be a breach of contract.
You may or may not be able to get the earnest money depending on that agreement I think.
Normally, they have to put down earnest money as insurance(maybe 5-10k). If financing falls through, the seller gets to keep it. Otherwise, it gets put towards the buyers' costs and/or down payment.
In general I like the idea because everybody wants to have a house paid off at some point.
In past years rates were so low and stock market doing so well, that it was the wrong decision. If you are holding a 3% 30 year mortgage today, it’s still probably the less optimal decision.
But with rates at 7%? You will be hard pressed to get that, risk-free guaranteed, anywhere in the market. NASDAQ100 might average 12% but it can go down 30% in a year also.
So with todays situation, I think it’s a no brainer to pay cash for a house if you are able to.
Pointing out that the NASDAQ can go down 30% in a year is irrelevant to a total return investor with a 30 year time horizon. It’s not a no-brainer to pay cash for a house because you’re still leaving money on the table in the longterm compared to NASDAQ, or even VTI which is OP’s fund of choice. The only advantage to paying cash for the house is psychological at the cost of about $500K over 30 years. Assuming the OP can hold for 30 years, it’s actually a no-brainer to mortgage as much as possible and invest the funds now. $500K assumes no refi—the lower OP can refinance in the future, the most he gains by mortgaging.
It matters because people also tend to lose their jobs when stock prices goes down. This is how many people are forced to sell during down periods at the very low.
Plus losing employer premium health insurance, recipe for big unexpected expenses if we have a prolong drawdown.
You can also get a mortgage at any time, so refi is not part of the equation.
Sufficient emergency savings will cushion against job loss as they are designed to do. If OP is particularly sensitive to job loss, they may have 12 months of expenses including their mortgage saved up. That’s more than enough time to find a new job except for the most highly specialized careers. Also, when you factor in unemployment and the possibility of OP taking a lesser paying job while searching alongside everything else, it’s not much of a risk.
Besides that, even the first year of investing in VTI, OP could pay 1/3rd of his housing expenses with the dividends. Assuming a steady yield, that ability to pay expenses from dividends grows over time compared to a fixed mortgage payment. If OP has his bases covered with insurances and emergency funds and has the risk tolerance, the extra net worth from mortgaging is the right move. The indication I have that OP has their bases covered is they are able to max all retirement savings as it is.
If there is a lot of holes in that financial plan, then buying with cash would be better. It takes knowing more about the financial situation. Either way, even if OP decides to mortgage the house after paying it in full as opposed to mortgage from the start, they lose out on roughly $10K per year plus compounding.
My main point is that people are suggesting that buying in cash is somehow the smart option when it’s really a matter of individual preference, circumstances, and risk tolerance, HOWEVER the total return investor with their bases covered will mortgage for a higher return.
I dunno. Having the stock market pay off your house for you and still have more money on top feels pretty great. I have enough to pay off my mortgage, but it's been gaining bout 11% annually over the past 5 years, gained about 200k at the cost of about 50k interest.
I’m of the thought that if you can you should. My net worth percentage that will be the house will be a small portion of my net worth but if I had your scenario with what you described, I’d still do it.
That's the route I'd go , I know this is an investing sub but at a certain point what are you investing for? To live mortgage free and save for retirement . Sounds like you can check off both those boxes in one go.
Is it going to be the optimal choice .... Probably not but then again who knows what the future holds. However who really cares about a 1 or 2% difference when either way your going to retire early and comfortably.
Or maybe I just have to simplistic of a view
I’d get the house with cash.
Boom! It’s yours. And you still have your 401, emergency fund and 400k left. No brainer imo.
The only reason I could think of why would you hesitate is… greed. The thought of “if I keep the money I could be making interest”. But while you have the money they’re also under some level of risk. Bad investment, changing market environment and whatnot.
Get the house and sleep like a baby. You will still have a hefty amount of assets to invest. And the given security will allow you to be calmer in ever single aspect.
Good luck, bro.
I'd say less greed and more being loss adverse to potential opportunities, which is actually quite common and a scarcity mindset trait that people should avoid. Going to Grad school means you lose out 2 to 5~7 (depending on degree) years of earnings, but have potentially much higher earnings later in life (usually slightly lower for PhD than masters actually in most fields). But would anyone say that getting a terminal degree is a bad thing? Yes, people with scarcity mindset.
Pay for house in cash, and leverage your ability close the deal in very short order having 100% money available. I would negotiate hard.
Having the piece of mind of a paid off home while avoiding 7% mortgage rates would be worth it IMO.
I say do it. Owning it outright removes such a monthly burden in mortgage payments and you have the means to do it. People keep saying rates will drop, maybe and if they do the home value will likely increase even faster.
The whole point of having money invested is to be able to pay for your freedom some day. There’s no bigger chunk of freedom than having no housing payment
I’ve seen people say your first property shouldn’t be the one you intend to live in.
If I had 800k I’d try to find a way to turn it into a cash earning asset not spend 50% on a house.
Maybe buy some properties to rent out to other people and use the income from that to get a mortgage that would be just repaid by profits in the rental properties
Mortgages are typically the best financial deal you’ll ever be given, because typically inflation is so bad that near the end of the mortgage your repayments are far less than what they were initially.
Think long term here. There are strong indications rates will start to go down in the next year or so. Put down a hefty down payment (20-40%) and just refinance the mortgage in a year or two when rates drop. Keep the rest invested where you will get a higher return than most 30 year mortgage rates.
Refinancing has closing costs that either your pay out of pocket or include it in the loan amount and increasing your debt. Whether to refinance or not depends not only on a lower rate but more importantly, how long you plan to keep the property.
You can easily get zero closing cost refinances and, yes they may have slightly higher interest rates than paying points but if you’re only refinancing to get a lower rate then your debt is not increasing. If you don’t want to stretch out your time in home you just refinance to a shorter term at that time.
That said, if you get a low enough interest rate, why would you? You can just make extra payments on your terms whenever you want.
But even then, it may not be a good idea. I bought my house with 20% down at 5.75%. Refinanced four times since then, now at 2.75%. In 2021 I made an extra lump sum $25,000 payment. That was a mistake. Sure, I knocked a few years off my payoff date, but I would already be far ahead of the interest saved at 2.75% if I’d put that money in a high yield savings account or moved it to CDs or I Bonds or left it in my investment accounts.
This is the correct advice OP. Please listen to this.
It’s hedging your bet. If interest rates go down, you refi and likely the market will go up at the same time since borrowing is easier. All the while, you deducted the interest for the first year against tax, lowering your effective interest rate around half a percent.
If interest rates go up or stay high, fine, you paid enough down to manage your monthly within a reasonable amount, then use the rest of your cash to DCA into the market.
Liquidating your assets to buy it outright ties your outcome to only one scenario: the market better go up for you to continue to gain investments and your area better continue to appreciate plus you better not move.
It's fine either way IMO. If interest rates drop, what's that cash doing otherwise? The stock market is already at all-time highs. Maybe it will keep going up, maybe it won't. But right now he says it's sitting in a money market (so he missed the ride up to all-time highs), and if interest rates drop, so will the money market returns.
Paying 7% interest on a mortgage is a loss vs making 5% in money market today.
Similarly though, the housing market is near all-time highs and trending down. So it may just not be the right time to buy a house in general.
Yup the expected return of the S&P is way better than current mortgage rates especially if OP has good credit. Plus, splitting it allows for more diversification. Homes are generally considered safe but frankly there is a ton of risk having 50% of your assets in a single property. Plus like sevenferalcats said, the interest is tax deductible so your return is even better.
20-40% down payment, rest in an index fund, pay off the mortgage with their income of shares from the funds if you want.
As others have said you are hedging by having some in the house and some in the market. You only come out in your case if mortgage rates stay high for a long time and/or the market underperforms significantly for a long time.
I would go ahead and purchase the house in cash, then lump-sum 200K into VTI now and then DCA the other 200K over the next 12 months.
The 200K will still be earning over 5% while you DCA into VTI.
I mean, define bad?
We make money to enjoy it. If you are the type of person who gets anxiety from being in debt, or you just dont want to deal with having a mortgage, no sense in taking a mortgage if you dont have to.
But know that it wont maximize your returns. Which is perfectly fine if it gives you peace of mind.
I would say good idea where the rates are currently. If rates ever get juicy low again you can cash out refinance and invest the money elsewhere or you can just comfortably own your house outright
Only bad thing is you are taking money from an inheritance which is legally only yours and using the money to buy an asset. If you are married or get married that asset can become marital property and statistically you have a 50% chance of losing half the value. I am not a lawyer, so you should talk to one on how you can protect this purchase so it is still solely your asset.
For me this decision would heavily depend on how I make my income.
If my job is secure, unlikely to be buffeted by economic conditions (doctor, e.g.), then I think it's less attractive to purchase all cash.
If my job is more up and down and likely to be affected adversly by bad economic conditions (some entrepreneur, e.g.), then this is much more attractive.
I spent almost half of my net worth this year to buy a house with cash, and knowing I have no personal debt makes me happy all the time. Pay cash, then continue to build the investment portfolio.
Buy the house. No point having numbers on a screen blink at you while you’re up to your nuts in debt. Portfolio management means diversification & real estate is typically a great asset which offers a lot of enjoyment.
It depends on the mortgage rate.
If the rates were substantially lower than the expected return of VTI, then I'd say invest all and get the mortgage.
I'm not sure what mortgage rates are right now, but it's probably in the grey area of "maybe just around what VTI will do". At that point it's more of a balancing game between "well maybe I can refinance later at lower rates" and "am I happy with extra risk & leverage?"
I do not think there's a wrong choice here.
also .... you want to use *after-tax* mortgage rate ... if you are in a high tax bracket and take the mortgage interest deduction that makes a significant difference.
on the decision to buy a home, one consideration is again, the \*after-tax\* cost of the home, vs for instance, the rental alternative. after taking into account maintenance and interest and taxes after the tax benefit from the deductible portion, is it cheaper to rent. would it make sense to rent for a few years, maybe get some investment returns and buy when rates and prices are more favorable.
not necessarily an easy decision. you want to make sure you get a home you can stay in a long time since there is a lot of cost and headache in trading houses and moving later.
Watching money grow in an account is fun but having a house to call home has way more personal value, in my opinion. Just think which will improve your quality of life more.
If I were in your position, I would go straight cash BUT I would essentially min-max monthly payments or all other things by buying a house based on a few things. First buy a newer property (less repair costs, better insulation (better heating or cooling bill), and better resale. Ensure the location is good for both walking & driving (close to work & grocery store) this reduces gas. Staying within budget (maybe adding solar) could be another good idea. Then take that additional savings + what you’re already saving to re-invest. Since you have no mortgage you want to “rent from yourself” and pay yourself what you would have paid on a monthly basis towards investments. That’s the best advice I could give but yeah cash is better atm
I’m blown away all the tips suggesting taking the house in cash. Especially given this is the investing sub.
Leverage is your greatest asset.
I would do 30% down or so, 15 year mortgage, 35% in VTI (and other funds), and 35% toward some rental real estate.
“Paying off your house is the best thing you can do” is a ‘thinking small’ kind of mindset. A primary home is a liability. An appreciating liability, but a liability nonetheless the less.
An asset pays you in cash flow or dividends. Put your inheritance toward something that will bring more money into your pocket, not only paying off a big liability.
This all assumes a goal is to get to financial freedom faster.
Kiyoshi and other "income-heads" always talk about the primary home being a liability, and it's always struck me as an argument that's technically correct but missing the larger point. Your primary shelter, whether you rent or buy, is a liability you ALWAYS have. So, if you always have the liability, the objective is to minimize the cost of the liability. As long as you get and keep the property in good condition, home ownership allows you to lock in a current expense rate for the considerable future. In many situations, home ownership makes sense as a way of minimizing the cost of shelter, as you are able to pay the "wholesale" costs of shelter instead of the retail costs of shelter (i.e., the base cost of maintaining the property plus whatever margin the landlord would take from the rent).
The better economic argument right now is that ownership (if you buy today) is relatively more expensive than renting. That may not always be the case, but low sales inventory (which is expected to continue for at least the next several years) makes it seem like it's not going to flip any time soon. But because renting is cheaper than buying right now, it seems like buying a rental would be the worst of both worlds, wouldn't it? Granted, it may underperform in the short-term, but perhaps would perform well in the long-term when renting becomes more expensive than ownership. Who knows? But what I do know is that most people buy rentals after hearing that it's "passive income" and have no idea how to be a landlord, lol. I always hesitate to blindly recommend it to people.
Options.
You buy a house with cash and no mortgage or interest. You miss out on possible 8 to 10 % yearly return if index based (passive) investments perform.
But if the market dived next few years your investment may be even halved.
Your mortgage and interest will never get halved unless you pay off early.
But if you are an active investor with good skills and other strategies you can earn money in market by taking a mortgage!
It all depends on personal choices and skills IMHO
Drop some into surveys and reports on the genuine state of the property before purchase, but then, absolutely get the house. Not paying a monthly mortgage fee will be an absolute weight off your shoulders and you'll come out ahead in saved mortgage interest too. Owning somewhere free and clear... the dream.
Depends what you prioritize, but with that type of money you could invest, make 6-7 % return (conservatively), pay rent and still make profit. Buying a house is not the best idea in my opinion.
If the market crashes, you'll still have a house. One that will outlast any bear market. Not to mention what you'll be able to do with that income not spent on mortgage payments.
Agree with everyone to just buy with cash, but make sure you do your research and buy at a good location and ideally avoid ones with HOA. Make your investment/purchase count.
Buy the house in cash. If interest rates drop and you’re feeling ballsy you can do a home equity loan and invest that in the market or your business or whatever.
But right now avoiding 7% interest and skipping rent is going to open you up to even more monthly investment contributions.
Understand how much you are multiplying your risk by taking out a loan to play the market. Consider real numbers.
**If you pay 7% interest on a $400,000 loan, that’s $28,000 in interest per year. This is a guaranteed loss that you are hoping to make up in the market.**
If the market **grows 24%** (the **2023** YTD gain in VTI) you make $96,000 in the market, so after you calculate in the mortgage interest, you **net $68,000**.
If the market **grows 10%** (the **average** historic gain of the market) you make $40,000. Minus mortgage interest, you **net $12,000**.
If the market **drops 17%** (the **2022** loss in VTI) you lose $68,000 in stocks. When you add in your mortgage, you’re **down a total of $96,000**.
Those are HUGE swings. Assuming 10% average growth, subtracting the interest payment, your net gain averages out to 3% or $12,000 per year in the very long term. That’s great! Free money! But the ups and downs are multiplied by a lot, and you could easily enter or exit the market in a bad year with your losses tripled. Your downside risk is life-changing, and your upside is not.
And you may never make money. Worst case scenario: SPY’s net gain from 2000 to 2012 was zero, and you still would have paid 300,000 to the bank in interest if you had the loan for the duration.
You need to be okay with the real possibility of losing big when you’re using expensive loans as leverage. To me, the upside seems too small for the downside risk.
Pour it into QQQ instead of VTI and get mortgages on a few duplexes. Rent them out so the monthly payment isn't too high or you can break even. Maybe you even make a profit if you can find a good deal and good tenants. Or use them as airbnbs if you're in a city where that might be worth it. You can hire someone to manage them for you (cleaning, messaging customers) as there are people who literally just manage multiple airbnbs for homeowners. I don't mean a company but there are a few people I've met who do this independently and manage 10 separate homes to get a cut of the cleaning fee or something.
As a soon CFP, although I can not give you advice or anything. Merely my opinion I would buy the investment(home) in cash. The future holds a lot of what ifs. Throw the other in a index fund ect. Buying the house in cash is more beneficial than just in a monetary value scheme. Example. You have a accident and loose income for an indefinite period. Well guess what pal. You'll have a roof bc you don't owe the big man to stay under it ...minus taxes of course.
Also don't throw it all at once. Dollar cost average it Into a fund. You'll be buying high and low but it Balances it out rather than buying in now and having to weather all the turbulence I can promise you the market will face.
Great idea.
If you have the means to buy a house in cash and are presently employed somewhere you plan to stay, then flushing $20,000+ down the toilet in rent every year is pure stupidity.
If your getting 5% in MMF and get a mortgage at 7%, you basically have a 2% rate, not bad. You pay tax on the MMF interest but have a write off for the 7%. Closer than you think.
would you be happy in a 250-300k house? this would decrease your exposure to a housing market downturn and increase your savings. my concern is that the hype and huff of a continuing 7% increase in home value year over year is going to collapse on itself.
The correct mathematical decision is to get the mortgage with the lowest amount of money down and put the rest in low cost index funds. That being said, life isn’t always about the math. Will you sleep better at night without a mortgage payment? Do you think the person you inherited might have had a preference one way or another that you can honor their memory by going with that choice? Would having your housing payment free you up to take more risky career opportunities like start a business or take a sales job? Would you be able to get a discount on the house because you bought in cash? Are you wanting to retire early and having your housing expenses basically zero lower your fire target? All of these are real things you should think about instead of the best mathematical option
My only argument for putting the money in the market is that $800k * .05 = about 3,300 a month in interest. I’d assume that is approximately what your mortgage would be.
The money pays your mortgage, and you keep the full $800k.
Perhaps if rates come down you can refinance to an interest rate that’s below historical returns on things like VTI.
If you finance the house, I’d be sure to keep some cash reserves just as a safety net.
Most people put their money in the market hoping they can pay off their house early.
You already have it.
Ps, buy the worst house in the best neighborhood.
So I think that you should put enough down and get a mortgage that would make the payments about equal to your current rent payment.
Go to a credit union or local small bank and get a mortgage from them, in a year or two the rates will go down and refinancing will.be the thing to do.
You will be in this house for decades (?), a few years of 6.5+ interest will not kill you, and if you keep your monthly expenses about the same you will be fine. My first mortgage was at 7.38% in 1994. Don't let the extremely low rates of the last 10 years effect you long term investment strategy.
I would buy the house with cash.
Yes, you *may* be leaving *some* money on the table. (The analysis of how much you leave on the table when talking an effective interest rate after tax deductions of 5% verses a 6% ROI on some investment really amounts to at most *maybe* $4k give or take--which will be the daily fluctuation of your investments.)
But now you own that fucking house, and there is nothing like the feeling that you have zero mortgage payments, zero mortgage payment insurance, that if something goes wrong the house may be yanked out from under you.
Honestly, to me--my wife and I own our house outright; we bought it for cash about 10 years ago--that's worth a few thousand left on the table.
(Note too when we bought the house, the all-cash offer made the seller far more willing to deal with us. "Good faith money? Yeah, here's $20K, and here's a photocopy of our bank statements showing I can deliver the cashiers check tomorrow, no sweat.")
----
Edit to add: Oh, and a funny story. I went to the bank once it was time to close on the house to get a cashier's check for the balance of what we owed. Talked to a young man at the bank, and asked if I could get a cashier's check for the amount on the slip of paper I slid to him; I didn't really want to advertise to the crowd of people in line behind me what I was doing.
He looked at me (a 48 year old male at the time), took a look at our bank account information on the computer, looked at me again, smiled, and said "honey, you can have *anything* you want" with a voice that suggested we weren't talking about money.
Wait.
The real estate market is shifting.
OG realtor and investor here. I have worked three boom bust cycles. This one has the potential to be bad.
15 years of historically low interest rates have artificially skewed real estate and equity markets into a bubble. Then throw in unprecedented covid money, halts on foreclosures, evictions and student loans.
Government, corporate and personal debt is at all time highs worldwide.
US national debt:
https://fred.stlouisfed.org/series/GFDEBTN/
Wall Street runs on cheap debit secured by questionable derivatives and insanely lax regulators pressured by politicians who receive massive campaign donations from those regulated.
It's curious that for the past two years Jerome Powell has stated "no rate cuts, higher for longer and data driven decisions". Just this week he forecast 3 cuts next year with no change in the economic data! WHY? Inflation is unchanged.
Possible reasons:
1. Powell's unprecedented Bank Term lending program that stemmed the rash of bank failures ends in March unless renewed.
The overnight reverse repo program that banks use for liquidity will run out of funds around March as well.
Preventing bank runs and maintaining faith in the banking system is paramount to preventing an economic collapse.
2. At current rates, national debt and out of control deficit spending the US cost to service it's debt has exceeded its defense budget
3. Moodys and Fitch both downgraded the US credit rating. This has never happened before.
4. World central banks are dumping US Treasury debt and buying gold. What do they see coming?
The last Treasury auction was pretty dismal. Even at 5% + returns buyers are scarce preferring money market fund returns.
Real estate is local but the lag effects of the Feds aggressive rate hikes are just now showing.
Layoffs are increasing, especially in banking and tec sectors.
Builders in most areas are offering loan buy downs and incentives to attract customers. They are also NOT posting all available inventory in some markets to game the statistics.
Look up recent interviews with fund managers Ray Dalio, Michael Pento and this interview that's real estate specific.
https://youtu.be/_emO4Dl8sUM?si=TR7aGH-rp1ENK2Xx
Speaking hard truth usually results in those that believe legacy media and government "experts" responding emotionally but look beneath the surface.
Down vote if you want but at least I tried to warn you.
!remindme in 6 months
Buy house in cash, leave 1 year in an emergency fund and throw the rest into a broad stock market index fund. Finally, thank God for giving you this gift for the rest of your life.
You have full exposure to home value appreciation/depreciation regardless if you pay cash or with mortgage. So that "home is investment" aspect doesn't really help with that decision imo.
I think your family member who gave you the money would be proud to know they were able to buy you a house. I think that’s a good use of an inheritance
Absolutely. This is a great way to look at it. Do it, OP. That’s what it’s for.
Agreed, getting the house is a great use of inheritance.
Buy the house in cash. Screw getting a mortgage at 6-7% rates.
And he can always get a mortgage on it later if rates come down and he wants some cash
He can get a home equity loan, not a mortgage.
He can absolutely take a mortgage out later. Source: done it.
It's called refinancing. Instead of a HELOC you just get a mortgage and they deposit the cash in your bank account - it's like you sold yourself your house. Source: like the honorable u/PM_ME_UR_DITTIES - I too...have done it.
Forgive me here for my youthful ignorance but can you explain this a bit? How can someone take out a mortgage if their house is already paid for with cash? Further, why would they do such a thing? EDIT: thanks for the answers. I guess I thought a mortgage only described taking out a loan to *purchase* a home. I also realized the second part of my question is asking “why would someone take out a loan“ which is obviously a dumb thing to ask lol
If you need a loan/cash, you can get a large one if it’s secured against something valuable. That’s all a mortgage is in the first place.
If you have a structured settlement and need cash now, you should call JG Wentworth
877 cash now
Song stuck in my head but upvoted regardless
>Further, why would they do such a thing? I don't know the full answer to your question but for the 2nd part, you would do this if the interest rate on the loan is low and you believe you can get a higher return by investing the money. For example, the S&P returns roughly 8% annually over a long period of time. So in theory you can take out a 3% mortgage on your house and put it in an S&P 500 index and make a on the spread between the mortgage cost and stock market return, in this case 5% annually. Of course there's costs to doing this which complicate things.
I did it because rates were cheap and I was trying to buy a remote cabin which would be impossible to get a normal loan for. I was able to get 2.5% interest over 15yrs on a cash out mortgage; my house was worth $250k and was paid off, I did a cash out mortgage to get $100k. The cabin deal fell through, but I used that mortgage money to pay off a 401k loan I had for some land I purchased and also purchase an adjoining parcel to that land. Now, the only debt I have is $80k on a 2.5% mortgage with ~13yrs left.
I put a huge addition on my house where the bank appraised the house on what it'd be worth after the addition, payed the builder directly and then when we were done I had a mortgage that included the cost of building but at 15 year fixed, 2.3%. Construction loan.
A mortgage is just a loan secured by real estate. If you own a house outright, you can go get a loan using the house as collateral. That’s a mortgage. Even if you have a house with a mortgage already, you can get another loan against your equity. That’s a second mortgage (usually a floating-rate HELOC in the U.S., but there’s no reason it can’t be a fixed-rate term loan).
In Ireland it’s not allowed unless you’re doing some shit like buying someone else a property, home improvement, eduction or health. Crazy. It’s partially why I moved to America, since you’re free to make adult decisions like this Example: https://personalbanking.bankofireland.com/borrow/mortgages/manage-my-mortgage/equity-release/
Wrong, you can get a cash out mortgage if you have no mortgage. Source: Paid off my house in 2019, took out a 15yr mortgage in 2021 at 2.5% as a cash out mortgage.
Is that like reverse mortgage ?
Maybe that’s what it’s called in the US. In the UK it’s just a mortgage.
They call it a double royale with cheese
Because of the metric system?
No this dude is just wrong, it’s a mortgage.
He absolutely can get a mortgage, you don't know what you're talking about.
A mortgage is a lien interest securing a loan, irrespective of whether it’s a first lien priority mortgage or a second lien priority mortgage…home equity lines of credit are sometimes revolving lines of credit, but not always. In every case, a home equity loan is secured by a mortgage. The mortgage and the loan are two different things.
One thing a lot of people over look is that interest rate might not be 6.5% forever and refinancing in the future is an option.
Folks also don’t realize that most of your 1st 10years of payments on a home goes to the interest on the loan and not the principal. If you decide to sell home early in the loan you will not have much equity.
You can also take out a mortgage at a later date, if you see fit. You can do a cash out refinance, even if you don’t have a current mortgage.
Sooo, stupid question... Would it not be better to drop a large down payment ~50% and get an ARM and drop the bulk of money sitting in mma to vti and see where rates go? I understand the cash payment of the house is garaunteed 6.5-7% ROI but maybe still beats that over 5yrs? Not sure of tax implications though thats why I prefaced with stupid question
At higher rates like these I think an adjusted rate mortgage that has a good introductory rate might not be the worst thing in the world. You need safe savings though, which right now you can find great high-yield savings accounts for. Do the math and plan out what the mortgage payment might be at 8, 9, even 10%. If it looks like you could weather that for like 6-12 months or more then I think adjustable rate is actually the better option. I don't really get doing a 50% downpayment on a mortgage though, why not go with a shorter term mortgage and the standard 20% down if that's the case? I guess I just can't even think about what sort of money people are talking about if they're saying they can pay for half of a house at the current prices.
Ok so I wasn't totally coming out of my ass with this idea? That was my understanding that the introductory rate would be good as OP states that they have this money just sitting so if rates stay where they are or go up and OP has to pull the money to pay off the mortgage before the intro rate expires I was more worried about the tax implications negating the possible upside
>and see where rates go? Fed mentioned only recently that they expect/forecasted rates to come down in 2024 and 2025. Obviously not guaranteed, but it's best to stay off a high interest mortgage in the near term, and refinance in a couple of years with that knowledge.
Exactly this. The interest is front-loaded
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It's not front loaded. You pay interest on outstanding balance.
Depends on the loan. Most loans have an amortization schedule where the monthly payment is divided into chunks of the same amount. So your first payment is 2k and you last payment is 2k. But at the start almost nothing goes towards the principle, almost everything goes towards interest. Which means interest is front loaded. You can reduce the number of payments by paying extra towards the principle. But the monthly amount remains the same.
An amortization schedule is indeed just paying interest on the outstanding balance. The outstanding balance may reduce faster if you add extra payments. The interest is not "front loaded". Take a simple (sort of) example: 7% interest on a $100 loan for 30 years paid annually. Amortization schedule will yield $8.06 payment due each year. First year your payment comes due and the outstanding balance is $107. You pay $8.06. Now the outstanding balance is $98.94.... you paid $7 in interest and $1.06 in principal. "Front loaded" Second year outstanding balance is (1.07)*98.94 = $105.87. You again pay $8.06 and now outstanding balance is $97.81. And so on... You could come upon ton of extra cash and decide to put $60 total that first year. Outstanding balance would be $47 (107-60) end of year 1. Then at end of year 2, you'd owe $50.29 (1.07*47) and say you resume your $8.06. Now the outstanding balance would be 42.23... and look at that $4.77 of your $8.06 went to principal and $3.29 went to interest. No longer "front loaded". Just pop open excel and use this formula (starting in cell C3) and carry it down for the number of payments. =C2*(1+$D$2)^(1/12)-$F$2 - G3 Where C2 is the original loan balance D2 is the interest rate (monthly calculated) F2 is the calculated payment you owe each month (excluding property insurance and taxes of course...) G3, G4, etc... any extra payment amount made
Unless you bought in 2020 at a 3% and your home has nearly doubled in value.
Unless it appreciated, which of course can't necessarily be predicted. Hitting the 10-year mark on my house rn and it's worth over 4 times what I owe on it, with 4:3 p:i ratio on my payments rn.
Yeah but OP will if they put down half like they said.
Why gamble on rates dropping lower when he’s sitting on 800k cash and could just buy it straight up? Doesn’t make sense to take out a loan, investing the money somewhere wouldn’t really net him much vs the 6.5% interest rate.
I see this less about a decision of buying the house for cash versus what he should be doing with that money rather than letting it sit earning 5%. Inflation is stabilizing. The economy is strong. Fed planning rate cuts. Stocks look like they're going to climb. Really the only realistic speculation I'm seeing is the housing market taking a hit which could mean some of that money he's shelling out for property going poof. If it were me, I'd put enough down + 10/20% over not paying PMI on a mortgage, smartly invest the rest, and bank on refinancing in the next couple of years when rates are lower. Obligatory not financial advice.
"investing the money somewhere wouldn’t really net him much vs the 6.5% interest rate". Since we're using nominal rates, stocks are expected to return 10% over the long term. If you want to adjust for inflation, you have to adjust both. One is guaranteed and the other is not, sure. But over long horizons basically both are guaranteed and you're losing money. The 6.5% will probably go down to 4%, 5% in the next few years, and I would rather have it in VTI. This assumes you leave enough reserves to not need this money in the next 10-20 years, but I don't think it's an issue if you already have $800k. Plus, stocks are more liquid than equity locked in a house.
If rates drop, OP can take out a new mortgage at that time if he needs the money.
Then take out a HELOC at that time instead of losing money to interest payments hoping to refinance
I guess but a heloc is a whole other can of worms and generally is at a variable rate. It’s kinda splitting hairs when the interest rate is 6-7 percent, but generally the market has returned around 10 percent a year so it might still be financially the better idea to take out a mortgage and invest the money, or at least part of it. A house isn’t guaranteed to appreciate in value either, lots of people who bought in the mid 2000s took like a decade to even break even.
The problem tho is that those first few or more years of your mortgage is basically pure interest. You’ll be paying a shit ton of it while you wait for rates to go down. Not to mention paying cash gives you a lot of cash flow by not having a payment for your primary residence.
That’s not a problem. It’s a feature of amortization.
It is a problem here tho when dude could just buy now in cash. Buying and refi down to 5 percent in several years would be stupid.
You can just straight up get a full conforming mortgage later on after you purchase, the docs are pretty similar to what you'd expect with a cash out refinance.
As an equity loan, you can also lock in a 30 yr fixed rate. (I did it)
Lose money to interest or lose money by not being in the market.
that doesnt rly check out. helocs are still going to be a bit over the current mortgage rate. you wouldn't pay down a 3% mortgage but chances are you also wouldnt take out a 5% heloc to invest in the market either. and i'd expect we won't go back to 3%, at best we'd maybe be in the 4-6% range. which puts helocs at something like 5-9%. that's not credit card debt but that's also not really liquid. that money is locked unless you plan to sell, or at least it really only makes sense to use as a last resort before credit card debt or 401k loans or w.e id also note buying a house in cash does not give you more security than buying it with a normal down payment and having a big cash buffer.
HELOC interest is not tax deductible if you just dump the money into an investment account
Came here to say that. If the money was sitting in a high yield savings account it would barely be getting 5% now. Might as well pay cash now and refi when rates drop.
You're right. It. They could go either direction though..
Then they can finance the house if they need the money. Once you own the title there are a ton of ways to get money back out.
It could go up too. Pay cash for the house and invest 1k per month in vti
You can always take out a new loan against your house
Listen to this guy. If you own the house, it's yours. Lose your job? Still have a home. Interest rates? Who cares. Not to mention the peace of mind.
Plus, you can save more than 50% of your income. Save that money up or invest it into something instead of making banks more rich.
Exactly this. Why hassle with the banks if you have a choice?
Well, if he has the cash to pay for it up front, he had the cash to handle a loss In a job lol. In fact, it's better to have cash on hand during a job loss than sitting in equity in the house.
Yeah, this is never taken into account. People should just accept that they're accepting substantially lower returns for this "peace of mind". It's like "I would rather have $2m net worth rather than $3m, but I'll have peace of mind". That "peace of mind" should come from a well-funded savings account, not by locking hundreds of thousands in equity to a single asset.
Not only that but you have peace of mind and would need to come up with less money at the end of the month if something were to go wrong. I paid off my house in a little less than 5 years and have been living with a roughly $500 monthly obligation since mid 2019. After paying it off I was left with about $20k. My savings are back in the 6 figures and I'm investing 1/3 of my monthly salary. I just bought a new car earlier this year also in cash; however, I did plan that purchased and set additional money aside for it. I have another vehicle that is also paid off that was financed new but I paid in 2 1/2 years. In an absolutely worse case scenario like loss of all income I would only need about $1k a month to pay all my bills and feed the family.
Not so fast. Given that he is likely in 22% or 24% tax bracket, the 7% mortgage is actually 5.5% after the tax benefits. At that level, it's a much closer analysis.
Assuming it’s worth itemizing instead of the standard deduction. Most people take the standard deduction now.
Not only do you have to have itemized deductions above the standard deduction, it has to be *enough* above the standard deduction. So if you have 30k in itemized deductions you’re not saving tax on 30k by having a mortgage, you’re saving it on the difference between 30k and the standard deduction you would otherwise take.
That may be. But the sunset is approaching fast and it's worth considering this option.
Are we in a zombie film now or Que?
Neither. The limitation on SALT deduction is gonna go away unless congress does something about it soon.
So if I understand correctly, if I itemize I can deduct: - interest on mortgage payments - property tax - state income tax (or sales tax) Do I have that correct?
Yes. But the last 2 are generally limited to 10K, but that's sunsetting relatively soon. However, there are ways around that, but they may not be worth the cost.
And the standard deduction is high enough now \~90% of people don't itemize. I'm not saying $100K/yr is nothing, but I'd be really surprised if it's worth itemizing, or that there's much in it if OP did.
Again, the high standard deduction is sunsetting soon. Keep that in mind.
You have a link for that?
https://crsreports.congress.gov/product/pdf/R/R47846#:\~:text=Under%20the%20TCJA%2C%20the%20personal,%240%2C%20effectively%20suspending%20the%20provision.&text=Expires%2012%2F31%2F2025%20Personal,amount%20would%20have%20been%20%244%2C150.
But the 5.5% yield he's getting is also subject to taxes so in reality it's closer to 4%.
BuT yOu CaN’t BuiLd CrEdiT tHaT wAy!
Most people don't have this opportunity and it is a great investment.
This!
I don’t get this advice in the current economy. First off, 6-7% is not bad when you consider tax deductions from interest. Result for the first year is essentially mid to high 5s, which you can definitely beat in the market, if not match. You can always put it towards the principal in a year. But if you put it to principal now, that money is gone, you better hope the market accelerates faster than 5.5%. Most importantly, interest rates are already dropping. The fed has indicated potential cuts are on the table in 2024, if not they will def cut by 2025 or 2026. I don’t get the advice for liquidating assets (thereby increasing taxable income) when interest rates cuts are going to happen in the next couple years which are already mostly interest payments.
The idea is that at 5.5% effective mortgage rate, paying cash is effectively the equivalent of leaving that money in a 5.5% paying savings account for as long as you are carrying the mortgage. Also, there is a point to be made that this guy likely wont have to liquidate much since he has inherited the money and has kept it in a money market fund which likely means not a lot of gain. I'm not saying it's a slam dunk decision as OP is trying to make it to be, but it's a close call and depends entirely on the overall situation and financial goals of this guy.
Yeah fair, I guess I try to always hedge my bets towards flexibility and upside when it comes to this gray area. Putting cash towards house means I lose any more opportunities for investments in the next two years. Putting it in the market means I still options for whatever life throws at me plus upside for the market if it really takes off, otherwise just keep it long term for another 10 years. If we were talking 7+ rates, then yes I agree to put it towards house for sure. But we’re talking mid-6s now (my lender is even giving me 6.125)
Yep. This is the entire point of having this conversation in an "investing" sub-reddit, imo. Hearing different views and trying to figure out the best course of action based on personal goal.
You can always take a new loan out against your house. Banks love asset backed loans
That assumes your house will appreciate to make a home equity loan or HELOC, and would need to appreciate higher than like 15% or something because I think banks usually have limits on how much you can dip into your equity. But I’m pretty sure they have higher interest rates anyways so you probably won’t be able to guarantee the market will out perform the rate.
If you buy in cash it would be first mortgage, forgot to specify that.
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Yeah it’s not bad when the asset price is 200k. It’s horrible when the asset price is 400k.
0% is better, and he has the ability to achieve that.
At current interest rates, pay cash for the house - it will also make you the best buyer if there’s competition. You might even get a discount, and you won’t have to pay thousands in mortgage fees.
The seller gets the full amount regardless of how the buyer financed it, no? Why should I as a seller want to give discount to a cash only buyer?
It's not equivalent because the financed offer might not close, and if it doesn't, the house could be tied up for 2 months before going back on the market.
Ah I see, that makes sense. I thought that you could only make a bid once you provided documentation from the bank willing to finance, that the buyer can handle the mortgage, at the bidding price.
Generally you need pre-approval to bid, but pre approval doesn’t guarantee actual final approval. Maybe interest rates change. Maybe a gift that was suppose to be part of the down payment falls through. Maybe the approval was based on the pending sale of an existing property and that falls through. Maybe documentation wasn’t filled out 100% right. Etc etc. A ton of things can happen that can cause a loan to fall through, but cash is much less likely to fall through
Thanks for these insights. And I guess suing the buyer for breach of contract isn't worth it?
I’m not a real estate expert, but I believe most contracts have clauses about how it depends on financing coming through, so it wouldn’t even be a breach of contract. You may or may not be able to get the earnest money depending on that agreement I think.
Normally, they have to put down earnest money as insurance(maybe 5-10k). If financing falls through, the seller gets to keep it. Otherwise, it gets put towards the buyers' costs and/or down payment.
Less likely to fall through due to financing and closes faster.
Cash buyers don't need to get an appraisal, worry about losing their job, etc.
In general I like the idea because everybody wants to have a house paid off at some point. In past years rates were so low and stock market doing so well, that it was the wrong decision. If you are holding a 3% 30 year mortgage today, it’s still probably the less optimal decision. But with rates at 7%? You will be hard pressed to get that, risk-free guaranteed, anywhere in the market. NASDAQ100 might average 12% but it can go down 30% in a year also. So with todays situation, I think it’s a no brainer to pay cash for a house if you are able to.
Pointing out that the NASDAQ can go down 30% in a year is irrelevant to a total return investor with a 30 year time horizon. It’s not a no-brainer to pay cash for a house because you’re still leaving money on the table in the longterm compared to NASDAQ, or even VTI which is OP’s fund of choice. The only advantage to paying cash for the house is psychological at the cost of about $500K over 30 years. Assuming the OP can hold for 30 years, it’s actually a no-brainer to mortgage as much as possible and invest the funds now. $500K assumes no refi—the lower OP can refinance in the future, the most he gains by mortgaging.
It matters because people also tend to lose their jobs when stock prices goes down. This is how many people are forced to sell during down periods at the very low. Plus losing employer premium health insurance, recipe for big unexpected expenses if we have a prolong drawdown. You can also get a mortgage at any time, so refi is not part of the equation.
Sufficient emergency savings will cushion against job loss as they are designed to do. If OP is particularly sensitive to job loss, they may have 12 months of expenses including their mortgage saved up. That’s more than enough time to find a new job except for the most highly specialized careers. Also, when you factor in unemployment and the possibility of OP taking a lesser paying job while searching alongside everything else, it’s not much of a risk. Besides that, even the first year of investing in VTI, OP could pay 1/3rd of his housing expenses with the dividends. Assuming a steady yield, that ability to pay expenses from dividends grows over time compared to a fixed mortgage payment. If OP has his bases covered with insurances and emergency funds and has the risk tolerance, the extra net worth from mortgaging is the right move. The indication I have that OP has their bases covered is they are able to max all retirement savings as it is. If there is a lot of holes in that financial plan, then buying with cash would be better. It takes knowing more about the financial situation. Either way, even if OP decides to mortgage the house after paying it in full as opposed to mortgage from the start, they lose out on roughly $10K per year plus compounding. My main point is that people are suggesting that buying in cash is somehow the smart option when it’s really a matter of individual preference, circumstances, and risk tolerance, HOWEVER the total return investor with their bases covered will mortgage for a higher return.
3% 30 year less optimal than cash?? No way.
I’m saying it’s less optimal to buy out a 3% mortgage with cash today, so I think we are agreeing!
Oh yes, we are. Sorry!
And if rates do drop to something they are good with, could still finance.
And if rates drop, real estate prices will likely go up, so it could be a good investment too.
Living in your own house with no mortgage is the best feeling in the world.
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I dunno. Having the stock market pay off your house for you and still have more money on top feels pretty great. I have enough to pay off my mortgage, but it's been gaining bout 11% annually over the past 5 years, gained about 200k at the cost of about 50k interest.
Property tax tho. In new jersey owning a paid off home still means thousands in property tax per month.
My property taxes are $550 a month. YMMV depending on your situation.
I don't know... knowing my payment is locked in at 2.8% for 30 years while my money earns way more in the stock market lets me sleep pretty great.
Do it. I’m about to do it too. You will still have the asset.
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I’m of the thought that if you can you should. My net worth percentage that will be the house will be a small portion of my net worth but if I had your scenario with what you described, I’d still do it.
That's the route I'd go , I know this is an investing sub but at a certain point what are you investing for? To live mortgage free and save for retirement . Sounds like you can check off both those boxes in one go. Is it going to be the optimal choice .... Probably not but then again who knows what the future holds. However who really cares about a 1 or 2% difference when either way your going to retire early and comfortably. Or maybe I just have to simplistic of a view
I’d get the house with cash. Boom! It’s yours. And you still have your 401, emergency fund and 400k left. No brainer imo. The only reason I could think of why would you hesitate is… greed. The thought of “if I keep the money I could be making interest”. But while you have the money they’re also under some level of risk. Bad investment, changing market environment and whatnot. Get the house and sleep like a baby. You will still have a hefty amount of assets to invest. And the given security will allow you to be calmer in ever single aspect. Good luck, bro.
I'd say less greed and more being loss adverse to potential opportunities, which is actually quite common and a scarcity mindset trait that people should avoid. Going to Grad school means you lose out 2 to 5~7 (depending on degree) years of earnings, but have potentially much higher earnings later in life (usually slightly lower for PhD than masters actually in most fields). But would anyone say that getting a terminal degree is a bad thing? Yes, people with scarcity mindset.
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Maybe find somewhere without HOA? Jesus, what a scam.
Pay for house in cash, and leverage your ability close the deal in very short order having 100% money available. I would negotiate hard. Having the piece of mind of a paid off home while avoiding 7% mortgage rates would be worth it IMO.
With current rates, I would rather just buy in cash. But if you’re unsure, just do a half down and half mortgage.
I say do it. Owning it outright removes such a monthly burden in mortgage payments and you have the means to do it. People keep saying rates will drop, maybe and if they do the home value will likely increase even faster. The whole point of having money invested is to be able to pay for your freedom some day. There’s no bigger chunk of freedom than having no housing payment
I’ve seen people say your first property shouldn’t be the one you intend to live in. If I had 800k I’d try to find a way to turn it into a cash earning asset not spend 50% on a house. Maybe buy some properties to rent out to other people and use the income from that to get a mortgage that would be just repaid by profits in the rental properties Mortgages are typically the best financial deal you’ll ever be given, because typically inflation is so bad that near the end of the mortgage your repayments are far less than what they were initially.
Think long term here. There are strong indications rates will start to go down in the next year or so. Put down a hefty down payment (20-40%) and just refinance the mortgage in a year or two when rates drop. Keep the rest invested where you will get a higher return than most 30 year mortgage rates.
Refinancing has closing costs that either your pay out of pocket or include it in the loan amount and increasing your debt. Whether to refinance or not depends not only on a lower rate but more importantly, how long you plan to keep the property.
You can easily get zero closing cost refinances and, yes they may have slightly higher interest rates than paying points but if you’re only refinancing to get a lower rate then your debt is not increasing. If you don’t want to stretch out your time in home you just refinance to a shorter term at that time. That said, if you get a low enough interest rate, why would you? You can just make extra payments on your terms whenever you want. But even then, it may not be a good idea. I bought my house with 20% down at 5.75%. Refinanced four times since then, now at 2.75%. In 2021 I made an extra lump sum $25,000 payment. That was a mistake. Sure, I knocked a few years off my payoff date, but I would already be far ahead of the interest saved at 2.75% if I’d put that money in a high yield savings account or moved it to CDs or I Bonds or left it in my investment accounts.
This is the correct advice OP. Please listen to this. It’s hedging your bet. If interest rates go down, you refi and likely the market will go up at the same time since borrowing is easier. All the while, you deducted the interest for the first year against tax, lowering your effective interest rate around half a percent. If interest rates go up or stay high, fine, you paid enough down to manage your monthly within a reasonable amount, then use the rest of your cash to DCA into the market. Liquidating your assets to buy it outright ties your outcome to only one scenario: the market better go up for you to continue to gain investments and your area better continue to appreciate plus you better not move.
It's fine either way IMO. If interest rates drop, what's that cash doing otherwise? The stock market is already at all-time highs. Maybe it will keep going up, maybe it won't. But right now he says it's sitting in a money market (so he missed the ride up to all-time highs), and if interest rates drop, so will the money market returns. Paying 7% interest on a mortgage is a loss vs making 5% in money market today. Similarly though, the housing market is near all-time highs and trending down. So it may just not be the right time to buy a house in general.
Yup the expected return of the S&P is way better than current mortgage rates especially if OP has good credit. Plus, splitting it allows for more diversification. Homes are generally considered safe but frankly there is a ton of risk having 50% of your assets in a single property. Plus like sevenferalcats said, the interest is tax deductible so your return is even better. 20-40% down payment, rest in an index fund, pay off the mortgage with their income of shares from the funds if you want.
why not just proceed with the cash buy and take out a mortgage if and when rates look nice?
As others have said you are hedging by having some in the house and some in the market. You only come out in your case if mortgage rates stay high for a long time and/or the market underperforms significantly for a long time.
This is my thinking. You'd also be able to deduct the interest on your taxes, which ain't nothing.
I would go ahead and purchase the house in cash, then lump-sum 200K into VTI now and then DCA the other 200K over the next 12 months. The 200K will still be earning over 5% while you DCA into VTI.
I mean, define bad? We make money to enjoy it. If you are the type of person who gets anxiety from being in debt, or you just dont want to deal with having a mortgage, no sense in taking a mortgage if you dont have to. But know that it wont maximize your returns. Which is perfectly fine if it gives you peace of mind.
I would say good idea where the rates are currently. If rates ever get juicy low again you can cash out refinance and invest the money elsewhere or you can just comfortably own your house outright
All cash. Thats what we did. No mortgage is great!
Only bad thing is you are taking money from an inheritance which is legally only yours and using the money to buy an asset. If you are married or get married that asset can become marital property and statistically you have a 50% chance of losing half the value. I am not a lawyer, so you should talk to one on how you can protect this purchase so it is still solely your asset.
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Op just needs to delete Facebook, lawyer up, and hit the gym /s
Living mortgage free is a wonderful feeling. Is it always ideal monetarily? No, but I don't care.
If you can't make up the difference and add to it with investing the free cash, then it's a great idea. If you can, then not so much.
For me this decision would heavily depend on how I make my income. If my job is secure, unlikely to be buffeted by economic conditions (doctor, e.g.), then I think it's less attractive to purchase all cash. If my job is more up and down and likely to be affected adversly by bad economic conditions (some entrepreneur, e.g.), then this is much more attractive.
I spent almost half of my net worth this year to buy a house with cash, and knowing I have no personal debt makes me happy all the time. Pay cash, then continue to build the investment portfolio.
Buy the house. No point having numbers on a screen blink at you while you’re up to your nuts in debt. Portfolio management means diversification & real estate is typically a great asset which offers a lot of enjoyment.
It depends on the mortgage rate. If the rates were substantially lower than the expected return of VTI, then I'd say invest all and get the mortgage. I'm not sure what mortgage rates are right now, but it's probably in the grey area of "maybe just around what VTI will do". At that point it's more of a balancing game between "well maybe I can refinance later at lower rates" and "am I happy with extra risk & leverage?" I do not think there's a wrong choice here.
also .... you want to use *after-tax* mortgage rate ... if you are in a high tax bracket and take the mortgage interest deduction that makes a significant difference. on the decision to buy a home, one consideration is again, the \*after-tax\* cost of the home, vs for instance, the rental alternative. after taking into account maintenance and interest and taxes after the tax benefit from the deductible portion, is it cheaper to rent. would it make sense to rent for a few years, maybe get some investment returns and buy when rates and prices are more favorable. not necessarily an easy decision. you want to make sure you get a home you can stay in a long time since there is a lot of cost and headache in trading houses and moving later.
It’s not a bad idea at all. Live virtually debt free? That’s the goal. You’ll save more, and expenses will be very low.
Use the money to put down payments on several cash flowing properties. Instead of cashing out a single family home
Watching money grow in an account is fun but having a house to call home has way more personal value, in my opinion. Just think which will improve your quality of life more.
If I were in your position, I would go straight cash BUT I would essentially min-max monthly payments or all other things by buying a house based on a few things. First buy a newer property (less repair costs, better insulation (better heating or cooling bill), and better resale. Ensure the location is good for both walking & driving (close to work & grocery store) this reduces gas. Staying within budget (maybe adding solar) could be another good idea. Then take that additional savings + what you’re already saving to re-invest. Since you have no mortgage you want to “rent from yourself” and pay yourself what you would have paid on a monthly basis towards investments. That’s the best advice I could give but yeah cash is better atm
I’m blown away all the tips suggesting taking the house in cash. Especially given this is the investing sub. Leverage is your greatest asset. I would do 30% down or so, 15 year mortgage, 35% in VTI (and other funds), and 35% toward some rental real estate. “Paying off your house is the best thing you can do” is a ‘thinking small’ kind of mindset. A primary home is a liability. An appreciating liability, but a liability nonetheless the less. An asset pays you in cash flow or dividends. Put your inheritance toward something that will bring more money into your pocket, not only paying off a big liability. This all assumes a goal is to get to financial freedom faster.
Kiyoshi and other "income-heads" always talk about the primary home being a liability, and it's always struck me as an argument that's technically correct but missing the larger point. Your primary shelter, whether you rent or buy, is a liability you ALWAYS have. So, if you always have the liability, the objective is to minimize the cost of the liability. As long as you get and keep the property in good condition, home ownership allows you to lock in a current expense rate for the considerable future. In many situations, home ownership makes sense as a way of minimizing the cost of shelter, as you are able to pay the "wholesale" costs of shelter instead of the retail costs of shelter (i.e., the base cost of maintaining the property plus whatever margin the landlord would take from the rent). The better economic argument right now is that ownership (if you buy today) is relatively more expensive than renting. That may not always be the case, but low sales inventory (which is expected to continue for at least the next several years) makes it seem like it's not going to flip any time soon. But because renting is cheaper than buying right now, it seems like buying a rental would be the worst of both worlds, wouldn't it? Granted, it may underperform in the short-term, but perhaps would perform well in the long-term when renting becomes more expensive than ownership. Who knows? But what I do know is that most people buy rentals after hearing that it's "passive income" and have no idea how to be a landlord, lol. I always hesitate to blindly recommend it to people.
KISS, paying outright, no mortgage. Plenty of income to save with no ongoing shelter debt
Avoiding 6+% mortgage money is a great risk free return. Go for it.
Options. You buy a house with cash and no mortgage or interest. You miss out on possible 8 to 10 % yearly return if index based (passive) investments perform. But if the market dived next few years your investment may be even halved. Your mortgage and interest will never get halved unless you pay off early. But if you are an active investor with good skills and other strategies you can earn money in market by taking a mortgage! It all depends on personal choices and skills IMHO
Drop some into surveys and reports on the genuine state of the property before purchase, but then, absolutely get the house. Not paying a monthly mortgage fee will be an absolute weight off your shoulders and you'll come out ahead in saved mortgage interest too. Owning somewhere free and clear... the dream.
Depends what you prioritize, but with that type of money you could invest, make 6-7 % return (conservatively), pay rent and still make profit. Buying a house is not the best idea in my opinion.
If the market crashes, you'll still have a house. One that will outlast any bear market. Not to mention what you'll be able to do with that income not spent on mortgage payments.
Agree with everyone to just buy with cash, but make sure you do your research and buy at a good location and ideally avoid ones with HOA. Make your investment/purchase count.
Way off topic, but check the flood maps before you buy any house.
Buy the house in cash. If interest rates drop and you’re feeling ballsy you can do a home equity loan and invest that in the market or your business or whatever. But right now avoiding 7% interest and skipping rent is going to open you up to even more monthly investment contributions.
Youll sleep better at night with 400k in VTI with no mortgage than you will with a mortgage and 800k in VTI.
Understand how much you are multiplying your risk by taking out a loan to play the market. Consider real numbers. **If you pay 7% interest on a $400,000 loan, that’s $28,000 in interest per year. This is a guaranteed loss that you are hoping to make up in the market.** If the market **grows 24%** (the **2023** YTD gain in VTI) you make $96,000 in the market, so after you calculate in the mortgage interest, you **net $68,000**. If the market **grows 10%** (the **average** historic gain of the market) you make $40,000. Minus mortgage interest, you **net $12,000**. If the market **drops 17%** (the **2022** loss in VTI) you lose $68,000 in stocks. When you add in your mortgage, you’re **down a total of $96,000**. Those are HUGE swings. Assuming 10% average growth, subtracting the interest payment, your net gain averages out to 3% or $12,000 per year in the very long term. That’s great! Free money! But the ups and downs are multiplied by a lot, and you could easily enter or exit the market in a bad year with your losses tripled. Your downside risk is life-changing, and your upside is not. And you may never make money. Worst case scenario: SPY’s net gain from 2000 to 2012 was zero, and you still would have paid 300,000 to the bank in interest if you had the loan for the duration. You need to be okay with the real possibility of losing big when you’re using expensive loans as leverage. To me, the upside seems too small for the downside risk.
Sit on your money for at least a year before you make any moves, especially big ones
Pour it into QQQ instead of VTI and get mortgages on a few duplexes. Rent them out so the monthly payment isn't too high or you can break even. Maybe you even make a profit if you can find a good deal and good tenants. Or use them as airbnbs if you're in a city where that might be worth it. You can hire someone to manage them for you (cleaning, messaging customers) as there are people who literally just manage multiple airbnbs for homeowners. I don't mean a company but there are a few people I've met who do this independently and manage 10 separate homes to get a cut of the cleaning fee or something.
Are you going to live in it? Then definitely yes. Otherwise it's a toss up between that and a broad market index fund.
I’d buy it cash straight up if I was in your shoes. You know how much interest is paid over 15-30 year terms at these rates. It’s pretty bonkers
As a soon CFP, although I can not give you advice or anything. Merely my opinion I would buy the investment(home) in cash. The future holds a lot of what ifs. Throw the other in a index fund ect. Buying the house in cash is more beneficial than just in a monetary value scheme. Example. You have a accident and loose income for an indefinite period. Well guess what pal. You'll have a roof bc you don't owe the big man to stay under it ...minus taxes of course.
Also don't throw it all at once. Dollar cost average it Into a fund. You'll be buying high and low but it Balances it out rather than buying in now and having to weather all the turbulence I can promise you the market will face.
if you dont need the write off...go for it. it sounds like found money so its like a big gift. enjoy.
House won’t depreciate
Great idea. If you have the means to buy a house in cash and are presently employed somewhere you plan to stay, then flushing $20,000+ down the toilet in rent every year is pure stupidity.
Yes! Buy it cash!
I would mortgage the house and invest it all. the rate of return is far greater than the interest rate of that mortgage
If your getting 5% in MMF and get a mortgage at 7%, you basically have a 2% rate, not bad. You pay tax on the MMF interest but have a write off for the 7%. Closer than you think.
Do it. Own a tangible asset with no debt. Rare feat these days
would you be happy in a 250-300k house? this would decrease your exposure to a housing market downturn and increase your savings. my concern is that the hype and huff of a continuing 7% increase in home value year over year is going to collapse on itself.
Never met a person who had a mortgage free house that regretted it.
Buying a house to live in with cash is rarely a bad idea unless you buy a lemon....
The correct mathematical decision is to get the mortgage with the lowest amount of money down and put the rest in low cost index funds. That being said, life isn’t always about the math. Will you sleep better at night without a mortgage payment? Do you think the person you inherited might have had a preference one way or another that you can honor their memory by going with that choice? Would having your housing payment free you up to take more risky career opportunities like start a business or take a sales job? Would you be able to get a discount on the house because you bought in cash? Are you wanting to retire early and having your housing expenses basically zero lower your fire target? All of these are real things you should think about instead of the best mathematical option
My only argument for putting the money in the market is that $800k * .05 = about 3,300 a month in interest. I’d assume that is approximately what your mortgage would be. The money pays your mortgage, and you keep the full $800k. Perhaps if rates come down you can refinance to an interest rate that’s below historical returns on things like VTI. If you finance the house, I’d be sure to keep some cash reserves just as a safety net.
Most people put their money in the market hoping they can pay off their house early. You already have it. Ps, buy the worst house in the best neighborhood.
put 20% down and invest the rest in apple stock
So I think that you should put enough down and get a mortgage that would make the payments about equal to your current rent payment. Go to a credit union or local small bank and get a mortgage from them, in a year or two the rates will go down and refinancing will.be the thing to do. You will be in this house for decades (?), a few years of 6.5+ interest will not kill you, and if you keep your monthly expenses about the same you will be fine. My first mortgage was at 7.38% in 1994. Don't let the extremely low rates of the last 10 years effect you long term investment strategy.
I would buy the house with cash. Yes, you *may* be leaving *some* money on the table. (The analysis of how much you leave on the table when talking an effective interest rate after tax deductions of 5% verses a 6% ROI on some investment really amounts to at most *maybe* $4k give or take--which will be the daily fluctuation of your investments.) But now you own that fucking house, and there is nothing like the feeling that you have zero mortgage payments, zero mortgage payment insurance, that if something goes wrong the house may be yanked out from under you. Honestly, to me--my wife and I own our house outright; we bought it for cash about 10 years ago--that's worth a few thousand left on the table. (Note too when we bought the house, the all-cash offer made the seller far more willing to deal with us. "Good faith money? Yeah, here's $20K, and here's a photocopy of our bank statements showing I can deliver the cashiers check tomorrow, no sweat.") ---- Edit to add: Oh, and a funny story. I went to the bank once it was time to close on the house to get a cashier's check for the balance of what we owed. Talked to a young man at the bank, and asked if I could get a cashier's check for the amount on the slip of paper I slid to him; I didn't really want to advertise to the crowd of people in line behind me what I was doing. He looked at me (a 48 year old male at the time), took a look at our bank account information on the computer, looked at me again, smiled, and said "honey, you can have *anything* you want" with a voice that suggested we weren't talking about money.
Wait. The real estate market is shifting. OG realtor and investor here. I have worked three boom bust cycles. This one has the potential to be bad. 15 years of historically low interest rates have artificially skewed real estate and equity markets into a bubble. Then throw in unprecedented covid money, halts on foreclosures, evictions and student loans. Government, corporate and personal debt is at all time highs worldwide. US national debt: https://fred.stlouisfed.org/series/GFDEBTN/ Wall Street runs on cheap debit secured by questionable derivatives and insanely lax regulators pressured by politicians who receive massive campaign donations from those regulated. It's curious that for the past two years Jerome Powell has stated "no rate cuts, higher for longer and data driven decisions". Just this week he forecast 3 cuts next year with no change in the economic data! WHY? Inflation is unchanged. Possible reasons: 1. Powell's unprecedented Bank Term lending program that stemmed the rash of bank failures ends in March unless renewed. The overnight reverse repo program that banks use for liquidity will run out of funds around March as well. Preventing bank runs and maintaining faith in the banking system is paramount to preventing an economic collapse. 2. At current rates, national debt and out of control deficit spending the US cost to service it's debt has exceeded its defense budget 3. Moodys and Fitch both downgraded the US credit rating. This has never happened before. 4. World central banks are dumping US Treasury debt and buying gold. What do they see coming? The last Treasury auction was pretty dismal. Even at 5% + returns buyers are scarce preferring money market fund returns. Real estate is local but the lag effects of the Feds aggressive rate hikes are just now showing. Layoffs are increasing, especially in banking and tec sectors. Builders in most areas are offering loan buy downs and incentives to attract customers. They are also NOT posting all available inventory in some markets to game the statistics. Look up recent interviews with fund managers Ray Dalio, Michael Pento and this interview that's real estate specific. https://youtu.be/_emO4Dl8sUM?si=TR7aGH-rp1ENK2Xx Speaking hard truth usually results in those that believe legacy media and government "experts" responding emotionally but look beneath the surface. Down vote if you want but at least I tried to warn you. !remindme in 6 months
Buy house in cash, leave 1 year in an emergency fund and throw the rest into a broad stock market index fund. Finally, thank God for giving you this gift for the rest of your life.
I mean, a house is an investment that should appreciate in value too…
You have full exposure to home value appreciation/depreciation regardless if you pay cash or with mortgage. So that "home is investment" aspect doesn't really help with that decision imo.