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I was playing around and based on a 175k mortgage, you will pay about 115k interest over 30 years.
If you got a mortgage and invested the 175k from the start for 30 years compounding @ 8% minus the 115k interest you will have 1.5+ million.
If you had a paid off house and invested only the amount of mortgage you won't be paying, $800 a month, you will have about 1.1 million after 30 years @ 8% compounding.
I really would not be investing the money like that either way, I doubt, so for me it's moot (also, at 7.5k max a year in interest plus 4k property taxes, my standard deduction is bigger than interest/tax deduction) I want to either pay off my house , or sit on enough money to in theory, so I can do something different with my life than slave away for the next 30 years
We bought our last 3 houses with cash. We started with a $12,000 house, moved up to a $30,000 and now a $58,000. Housing is less expensive in smaller cities in KS so we have done well over a 12 year period. Cash is so much easier and you don't end up upside-down if you decide to sell. You can talk as much as want about the property increasing in value but having lived in 2 cities that had significant job loss, those values can plummet very quickly.
AnywhereElse gets it. The home we sold in FL is appraised now at about 1/2 what we sold it for, a home I own in Birmingham is in a similar situation. Housing is no longer a low risk investment. Economics can put a nice pile of doggie doo on those fancy spreadsheets.
If you had a paid off house and invested only the amount of mortgage you won't be paying,
$800 a month, you will have about 1.1 million after 30 years @ 8% compounding.
I think the problem in general with paying cash for a house is that very few people can move out of their parent's house, with the dosh to buy their own place in hand. If you create the next Facebook while still in your parent's basement, OK, fine, might as well pay cash.
But for the vast majority, certainly it was this way for me, it was buy with a mortgate or else rent a place to live. At the time, most places it seemed to me to make more sense to buy, writing off some of the mortgage interest, than to rent.
All this is going to depend on what market you are buying or renting in, one income or two, how reliable the job(s) are, credit scores, yadda, yadda. I don't think a general answer can be formuated.
Doesn't matter. Mr. Z refi-ed is house not too long ago with one of those variable rate loans everyone likes to hate. Why? Because at 1% why wouldn't you?
I think cash is only the way to go if you have no choice (bad credit).
We were able to use VA loans so no down payment and we live in California, so our market is a little crazy compared to the rest of the US.
We've bought two places in the past 5 years, bought one to live in and then moved and bought another and kept the original as a rental. The first place has jumped in value at least 75k over 5 years, the second we bought at 235K - two of the identical units just sold here for 350K.
Both places are financed at 3.75 fixed for 30 years. We've chosen to invest in our retirement accounts over paying down either mortgage at this point. That might change is the gov't does away with the mortgage deductions on eith property.
I think mortgage is a better way to go for most people.
Yeah, cash would have been helpful in '09 when I was thinking of buying. They don't do stated income loans anymore, and I had JUST started working self-employed. I can enough for 40% down in cash, but couldn't get a loan. With what I was looking at, the mortgage payment (with 40% down) would have been about half what I pay in rent. Didn't matter. Need two years' of tax returns to verify SE income. I mean, it's not the end of the world. Real estate is quite a bit more expensive here than it was in '09, but then my investments are up over 50% as well.
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We were able to use VA loans so no down payment and we live in California...
We've bought two places in the past 5 years, bought one to live in and then moved and bought another and kept the original as a rental...
Things must have changed since I last had a VA loan. At that time, one could not rent out a house with VA financing. It had to live in it by the purchaser. And, I had to pay off, or transfer to a new buyer, the VA loan before I could get another. (This was in SoCal also. My last few loans were/are CalVet. Great program!)
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