I'm thinking about putting 40% down, or about $120K. Doing so would leave me with $50K in my NON-retirement brokerage account. I have a full time job where I continue to contriubte 16% to my 401k. So my question is......Is it unwise to put that much down? Should I keep more than $50K in my NON retirement account? If so, why?
2006-06-23 07:27:26 · 9 answers · asked by Mo 2 in Business & Finance ➔ Personal Finance
I find that paying as much of a downpayment as possible is a good thing. Reason? Interest. Use an online amortization calculator and calculate the amount of interest you will pay over the life of the loan with a 10% down vs your 40% down. You'll find that amount staggering. Most people look to the short term benefits of having more cash on hand, I look to the long term benefits of paying less in interest payments. And besides, once the money is in your house, it becomes a nest egg of sorts that will grow in the long term. Good luck!
2006-06-23 07:34:17 · answer #1 · answered by Sugarbear 3 · 1⤊ 0⤋
It is a relatively simple question to decide on. I think you should first start with looking at the rate of interest you pay on your mortgage and the rate of return you earn on your investment in NET terms. Simple arithmetic will tell you that 5%<6% in net/after-tax terms. Therefore, you choose to invest for the higher-yielding instrument. Why put money into an invesment that earns 2% less than what you could generate from a mere investment in let's say all the big banks?
Number 2. You then need to weigh the RISK and the true BENEFIT of this investment. Is it riskier to invest into the stock portfolio or any portfolio to that extent...be it in 401k or whatever it may be called. What is the true benefit of your investing more money into your house? Is it secure? Well, your house is NOT 100% secure!!!..It is still prone to market fluctuations/value of real estate, area down/up grade, etc. But neither is your portfolio unless it is in CDs of some sort...
Number 3. Time horizon. What is the time-frame for your investment? It is pretty obvious for 401K. What about the house? If you are going to move out in 4-5 years, will the property appreciate by 6-8% on average annually?
Number 4. A lot of people DON'T take into consideration the sales and closing fees related to the projected (!) sale of their property. It can effectively wipe out up to 6% off your purchase price...just like that...Let's face it - it is the reality...unless you sell your house yourself and save on realtor's commission that way. That will STILL leave you with the legal fees to close the transaction, discharge your mortgage, get the deed...
HOPE that helps!
2006-06-23 15:30:49 · answer #2 · answered by Elias 2 · 0⤊ 0⤋
You appear to be a financially sound individual. Now you want to take your savings and place a down payment on a house at 40%. I understand that you can put more down, the question is, is it wise to do so.
I would think that the minimum down would probably be better off as you would have more in you savings to invest in other instruments. It is a fact that most will refinance their homes for some reason in about 5-6 years after purchase. Lower the rate, purchase a big ticket item, go into business for themselves.
Your money could be better spent purchasing something that depreciate and not appreciate, also something that is not tax deductible item.
Even though lots of advice will be given today, you should also check with your tax adviser as well as your financial adviser and weigh the pros and cons of your situation.
I hope that this has been of some use to you, good luck.
"FIGHT ON"
2006-06-23 15:05:48 · answer #3 · answered by Skip 6 · 0⤊ 0⤋
If putting down a larger amount will allow you to put more aside into your retirement accounts due to the increased cash flow occasioned by the lower monthly mortgage payment, it may be a good idea.
Those who say that mortgage equity is not a liquid asset may not be aware of the flexibility new equity loan products offer. Any time you wished to access your equity you would have many choices from which you could tailor a cost effective and convenient way to do so.
You avoid the expense of private mortgage insurance at 80% loan to value, so anything above a 20% down payment benefits you in any case.
If I may of further assistance my toll free is 800 971-4638, ext. 223
2006-06-23 15:11:47 · answer #4 · answered by mazziatplay 5 · 0⤊ 0⤋
Will the equity in the house increase at a greater pace/ percentage rate than what you are getting from wherever you currently have the money invested? If so, then the extra down payment is worth it, if not then don't put the money into the down payment. Think of the down payment in the same way you would any other investment, what gets you the highest return.
2006-06-23 14:36:50 · answer #5 · answered by Anonymous · 0⤊ 0⤋
You might be better off putting down $100,000 and getting a 15 year mortgage. That way, you would have more $$$ in your brokerage account, yet build equity in your home more quickly than if you had a conventional 30 year mortgage.
2006-06-23 14:43:33 · answer #6 · answered by ps2754 5 · 0⤊ 0⤋
put down only 20% it will still give you a good rate. When invest the rest of your money. It will give you a better return, remember
equity in a home has no return and is not liquid reserves. You don't want to be house rich and money poor.
2006-06-23 14:51:49 · answer #7 · answered by druvard 2 · 0⤊ 0⤋
How long to you plan on staying in the home? If you are planning to stay for a short time, you are better off with as little down as possible. Also, are you in an area that is appreciating?
http://www.lendermark.com
2006-06-23 14:46:45 · answer #8 · answered by lendermark1 2 · 0⤊ 0⤋
You voted for Bush, eh?
2006-06-23 14:30:51 · answer #9 · answered by UbiquitousGeek 6 · 0⤊ 0⤋