Let's saythat I have $200,000 in cash. I want to purchase a house that is $180,000. Would I be better off, finacially, if I took out a mortage loan and invested my cash holdings or if I paid the house off in one payment and invested my would have been monthly mortage payment money?
2007-11-05 01:58:54 · 10 answers · asked by Mike E 4 in Business & Finance ➔ Personal Finance
Pay cash for the house. If you were to finance the house and something happened and you couldn't make the payments the bank will take your house. If you pay for you house, its yours.
Take what would have been your payments every month and invest after you have a emergency fund of six months of expenses.
All the tax deduction is, is you dont pay tax's on the interest you pay the bank. If you pay $1,000.00 a yr in interest to the bank and your in the 25% tax bracket you dont pay the government $250.00. But, you pay the bank $1,000.00 in interest. So, without a mortgage you are saving $750.00 a yr.
Debt Free is defenitly the way to be.
2007-11-05 03:04:12 · answer #1 · answered by heybulldog 5 · 0⤊ 0⤋
A lot depends on where you live, what the housing market is like there, how much income you have each year, and how you'll invest the money. If you're in the US, you can deduct mortgage interest and taxes from your income tax bill. The variables are tough to predict. I'd suggest you spend a few dollars to visit a CPA or financial planner, and get their advice. You might spend $100 or $200, but you'll potentially save thousands this way. Sounds like a good deal to me.
2007-11-05 02:07:24 · answer #2 · answered by Ralfcoder 7 · 0⤊ 0⤋
Buy the house outright. If nothing else, you know you don't have to budget a mortgage payment....ever :) Put the remainder in investments if you already have an emergency account set up. Even though your mortgage is paid off, you still have property taxes, upkeep, the occassional bill from left field. If you have your other things in order, put that $20,000 wherever you like and have fun!
2007-11-05 02:07:03 · answer #3 · answered by bcyouletme 3 · 1⤊ 0⤋
The second. What interest rate are you talking about, here? Let's assume 6%. You're getting a guaranteed 6% return by paying in full. But actually, you're getting more than that - because in order to PAY that 6% interest, you probably have to make 30% MORE than that - to pay the FICA and income taxes on the money, so you have what's left to pay the interest.
So you're looking at an EFFECTIVE rate of 8%, GUARANTEED. Wow. Then, if you factor in the RISK factor and transaction fees, you're not going to come close to that kind of return.
2007-11-05 02:04:18 · answer #4 · answered by Anonymous 7 · 0⤊ 0⤋
Paying off the loan is plenty greater effective to you. the money you make investments will some distance exceed the tax reward you get for a loan. in basic terms undergo in techniques with any investment there is possibility, there are additionally investments that shrink the prospect and inspite of the reality that they strengthen slower the foremost ingredient of undergo in techniques is that the investment is transforming into extremely of costing you funds as activity on a loan will.
2016-10-15 02:45:52 · answer #5 · answered by ? 4 · 0⤊ 0⤋
There are advantages to owning a home outright, but if your lucky with other investments, you could do better with the cash. Look at your prospects and weigh them paying attention to the short, medium, and long term outlooks, then asses your goals and you will be close to the answer.
2007-11-05 02:04:28 · answer #6 · answered by bloodshotcyclops 4 · 0⤊ 0⤋
In UK, it depends on your age and income.
Normally, pay off the Mortgage ..
... otherwise if you have a high income (i.e. pay 40% Tax) and you are in your 50's, I would say 'put the money into a SIPP' ..
(you get all you Tax back on SIPP contributions and can 'retire' from the SIPP with a 25% Tax free lump sum after age 50 (or after 55 after 2010)).
2007-11-05 02:37:58 · answer #7 · answered by Steve B 7 · 0⤊ 0⤋
put 20% down on house mortgage the rest on a 30 year mortgage....look into investment options from there..your money as a whole will earn you more then you are paying out on interest on the mortgage and you are not tieing up your funds in the unstable housing market as it is now..talk with your own personal financial advisor on this..if you need one let me know i can get you in touch with one..
2007-11-05 02:07:37 · answer #8 · answered by becca9892003 6 · 0⤊ 0⤋
You have to look at your total financial situation to answer that. But if you pay cash for the house, you could wind up "house rich and cash poor."
2007-11-05 02:02:13 · answer #9 · answered by Anonymous · 0⤊ 0⤋
just so you know you do not pay FICA taxes on investment income and it is only taxed at 15% at most, if you sit down and crunch the numbers, which i dont feel like doing you can figure it out.
2007-11-05 02:08:46 · answer #10 · answered by scott A 5 · 0⤊ 0⤋