Cash or Mortgage?

Question

Here is my situation:

I have about 11 million in securities (stocks, bonds) portfolio with no debt. I am not looking for super houses so houses in the 500k ~ 1 million will do for me. I am almost 30 and single, no kids (for your tax considerations). I have no prediction of my future income because it depends almost entirely on markets and discretionary bonuses.

I am pretty confident that I can get a low interest mortgage, but does it make sense for me to do that? Suggestions welcome.

Answer 1

I was wondering the same thing, I went ahead with buying outright, just because of market conditions, and needed to take some money off the table.
Also, no kids, and no debt.

Matthew:
I agree, if looking exclusively at tax advantage, but investing the money even conservatively, could yield a positive cash situation.

I did it just for the safety

Answer 2

Having a mortgage on a home can protect your capital; should a disaster or a crash in the market occur, you are not the one holding the bag (the bank is). For instance, you buy a house in earthquake country, you could get the special insurance that covers earthquakes (which is double the price). But who is to say that the insurance company would even pay off? Maybe it is cheaper to carry a 200,000 balance on a home worth 1,000,000 and invest 200,000 in a money market (or something). You may pay a little more each month, but maybe it is less then what you would pay for the expensive insurance, as well as an investment that doesn't preform like another could. Perhaps. I have heard of people doing this. But this strategy depends on where you live.

I believe in the next year there will be some decent opportunities in the housing market. It could take another few decades before you see the kinda of growth we have witnessed in the past.

I have moved half my assets off shore in foreign currencies. As the dollar has weakened I have sold of those assets and moved them back into the dollar. So far so good.

Answer 3

You will pay more in mortgage interest than you will get back from your mortgage interest tax deduction. For every $1 you spend on your mortgage interest, you'll only get back about a quarter in tax benefits. And if that sounds like a good deal to you, send me all the dollars you want and for every one I get I'll send you back a quarter. That's exactly what the IRS is offering.

Also, if your future income does falter, you won't have a mortgage over your head to worry about. You don't want to be so highly leveraged that you lose the very comfortable financial situation you're in. Besides, paying cash for a house will only take 10% or so out of your portfolio... and then the house is yours forever.

Answer 4

Just glancing at your history of questions, why am I having trouble taking this question seriously?