if you had $75,000 to spend on a house (ONLY a house). would you buy a house and live debt free or use the 75k

Question

as a down payment for a more expensive home?

Answer 1

Live debt free.

We are in the very beginning of a recession that is going to prove devastating for many of us "normal" Americans.

Not too mention your taxes, insurance and other carrying costs will be a lot less on a less expensive home.

Answer 2

There are several factors in making your decision. How long are you going to live there? If it's short term, pay cash and save 1500 in closing costs. If you can use write-offs to avoid taxes, your home mortgage and taxes go on a schedule A on your tax return and a $50,000 mortgage will allow you to file long-form rather than 1040A so there sould be additional deductions available if you have a home mortgage. If you can borrow at 6.5% and you are in the 25% tax bracket, your after-tax cost of borrowing is about 4.8%. You can probably get 5% on a $50,000 CD and defer that interest tax free to the next calendar year, so you have a positive earnings spread on your money. Having a mortgage paid properly enhances yourbuying power for future purchases. Your liquidity will be much better than putting all of your money into the bricks and mortar of the home. Historically, homes appreciated at 5% or more in many areas. Due to unsound lending practices for the past decade, banks have severely tightened credit to borrowers with low down payments, bad credit scores, and high ratio buyers so the entry level market has all but disappeared in some areas and this has slowed the housing market. Add the cost of oil which increases the cost of delivering all goods, heating houses and fueling cars and we are in perfect position for a recession. No new houses are planned by the nation's ten largest home builders, which mean that 164,000 fewer houses will be built...that affects concrete, lumber, appliances, drywall, lighting and labor markets dramatically. Add to that that in the past 12 months, $330 billion of adjustable mortgages reset and it put our 8 largest banks in bad financial positions. Now look at $2.9 trillion in mortgages scheduled to reset in the next four years and an anticipated 2,000,000 homes will go into foreclosure. This all adds up to deflation, recession decling values in the housing market. Where is Ronald Reagan when you need him. Stay liquid, great buying opportunities will come up for your other $50,000.

Answer 3

It would depend on your income level. If you don't have much of an income,buying a house outright makes sense. If you can afford a monthly mortgage maybe using some of the $75000 as a down payment makes sense.
Some people,myself included refinance there home and invest the money in the stock market. It all depends on your tolerance to risk.

Answer 4

Live debt free and start saving for house number two. I would make improvements on the house so that its worth more when I sell it and then in a few years (when the real estate market has gotten better) I would sell it for a good profit, add some of my savings and get a bigger and better house. Then I would start the cycle over again.

Answer 5

I would definitely use the 75k to buy a house - as it's definitely a buyer's market right now. Then in the future you can sell it for a profit (not to mention if you also fix it up).

Answer 6

Live debt free.

No one knows what is coming in the future.

The peace of mind you get from living with NO MORTGAGE PAYMENT is hard to describe.

It very liberating and unbelievable how much debt hanging over your head adds to the stress in your life.

Congrats if you can pay all cash for a home. Pay all cash!

Answer 7

I would put 10% down on a 750,000$ commercial property and use THAT income to pay my rent on a house. After 20 years or so i have my commericial property paid off and since i wont be paying off a 675,000 loan anymore my income goes up sharply!