Recently sold a house I inherited out of state and want to buy my first house so I can stop renting. The initial plan was to just find a nice house that I can afford, buy it and move on with my life. Then it occurred to me that there wont be very many occasions where I have this kind of money available to invest in my future.

With interest rates as low as they are is that a big factor?? I have very little financial intelligence and the whole process makes me feel so ignorant much like selling my house did.

Would love to hear any and all ideas.

get out in the country away from people
and pay for all you can outright

Here's a scenario; You put a significant amount of money into a home. Some circumstances beyond your control force you to sell in a depressed market.. All that money could evaporate. Another option would be to just walk away from a mortgage, with your cash still in your pocket/hole/savings account, gold bars etc...

Split the difference.   Pay down at least 50% and get yourself a really good rate on a 15 year fixed.  

Do this,mand you will thank me in 15 years.

Not really a option for me right now.

House rich, cash poor is NOT the way id go.


I like the 50/50 idea. No way id pay for a house cash. Id even go 30 year (lower monthly rate) and then just pay a lil extra each year to get it down to 15-20years.

I can help you without a disclaimer for 15 years in the future.

OP, check housing prices in your area; many county real estate records are available on-line.  What is the appreciation?  I'm sure that investing so much into a property, over 15 years, not will not yield as much to your net worth than if you placed most of your resources into the stock market.  What you may wish to consider, is to create a "sinking fund".  This means setting aside the money in an investment that has higher returns than your property mortgage.  You would have the opportunity to hold onto your cash with a higher interest rate, while yet have the cash to cover your mortgage while being able to make your monthly mortgage payment interest tax deductible.

For me the decision matrix would be rather simple:



Question: Are you ever going to sell this house before you die?  



Answer:

Yes -> 50% down, 30 year mortgage at a low rate

No -> Cash only.

I dont know a exact percentage but there is a pretty steady upward trend here. Everyone seems to think that with Tesla factory coming here it is going to skyrocket but I am not holding my breath.

I had thought about that exact scenario(sinking fund) but dont really have idea where to start. I guess I need to find a financial advisor because it is all greek to me.

I love simplicity I cant imagine this will be my last house.

I would buy a house cash. Then take whatever I have extra in my paycheck and max out my 401k and invest the rest in the market every month. If I loose my job, well I can live in my house and take unemployment and not worry about making my mortgage payment. If I lost my job and had to move out of state while the market was depressed, I would just rent it out. I cant really see a reason you are forced to sell except to maybe pay for huge medical bills.

However, given the markets average annual return plus dividends invested, the most money to be made would be to invest in the market. But I would prefer the safety net of having a house paid off.

Nobody has covered what needs to be questioned.


The answer is completely based on your appetite for risk, balanced with your experience investing.  Your age, your existing investments, your retirement expectations, etc.


You could finance the house, invest the money, and lose it all (or a big chunk)

You could finance the house, and stick the money in a sock drawer, and be paying 4-5% on a mortgage in interest.  However, you'd have cash for any big emergencies or opportunities.  Or you might blow it.

You could pay cash for the house, and keep living like you are, rent free, but having to pay property taxes, insurance, and repairs.  

There are NO investments with no loss of principal risk, that pay more than a mortgage, TODAY.  (doesn't mean it will always be this way, but looks to be this way for the foreseeable near future)


In some of these plans - you sleep good at night because you have lots of cash to cover any major life emergencies (such extended job loss/loss of income)

Some people don't sleep well until their mortgage is paid off.

Some people don't sleep well unless they know they have a good retirement portfolio working for them.


If you pay off your home, and don't buy more than you should - you can take that money you were paying in rent and built a nice nest egg over the years.  Just depends on who you are, and what kind of discipline you have, and goals you set.

I'm a very simple person. I don't need money to make me happy. What makes me happy is a simple, no fuss life spent with someone who enjoys the same. I would purchase a new home in cash. If I were an investor, I would leverage that money to buy as many properties as I can and wait 3 years to sell at when I predict the height of the market to be. This would allow me to make more money.

Really appreciate all the input.



Can you explain what that means please? Are you saying there are no no-risk investments that pay more than a mortgage??

I'll take it one step further:  There are NO investments without risk of loss.





end of story.





Even cash stuffed in your mattress or on deposit at your bank is not completely safe...





Life comes with risk.  





 

Yes I understand that I just wanted to understand what he was saying

Correct.  For instance - when a 5 year bank CD is paying 6%, and your mortgage is costing you 4%, there is NO reason to pay your mortgage off early.  A bank CD is FDIC insured, both the bank and the deferral protection would have to fail.  

Sure, all investments have risk, but saying that putting your money in the stock market, and a bank CD, have similar risk, is childish.  They aren't even close.

Today - 5 year jumbo CD's pay around 2.25%.  It is very difficult to find a no-loss of principal, government backed investment, that pays much more than that.  From this perspective, assuming a ZERO (or very, very low) risk appetite, it makes more sense to pay off your mortgage.

If you are a young person, don't need access to the money, and can put the money into balanced stock market mutual funds for the long haul, history tells us you will be MUCH, MUCH better off investing the money and taking the ride.

The only immediate concern I have is that our work contract is up in a year. Most likely it will be picked up again as it has the last few times but as someone who has never done contract work it is unnerving.

The real annoying thing is the smaller surrounding towns have plenty of properties I could buy outright but they commute is already too far.

If you don't have 6 to 12 months living expenses in liquid savings, I'd fully fund that before I'd ever consider buying a home, or investing money.  That should cover any job loss while you find a new one.  If finding a new job means relocating to another area and having to sell this potential home, then it would probably be a bad idea to purchase.

we are in an extreme interest rate environment.  the opposite end of the 80's where CD's were paying the teens, but so were loan rates.
Reversion to the mean implies it then would be a no brainer to lock in a fixed, low rate for as long as your cash flow makes sense. it follows you will we able to paydown your fixed loan with cheaper dollars in the future. short bonds, same concept.