I just moved to Austin from Bay and looking to purchase home for living. Found one for 350K. I have 300K cash in Online Savings account and close $500K vested / $300 unvested stocks from my employer. I did a prequal for Mortgage just to check my credit and i’m qualified for 3% interest for 15 years term. For my situation, should I sell $75K worth of vested Apple stocks to purchase the house by Cash (and to keep $25K as cash for emergency fund)? Or Go for Mortgage, may be with 20% to 40% downpayment and try to invest rest in Market to produce good returns to beat the Mortgage interest liability and produce additonal dividend/coupon (if i’m lucky considering the bull run)? thanks! TC: 275K (150K base + 125K rsu, bonus yearly avg.)
How long you been Apple? Apple pays dividend. Why miss out on that? Take mortgage as you can use as deduction for tax purposes
With $24K standard deduction, even taking $300K mortgage will result in just 9K interest annually at 3%, + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation.
I would give $200k down and have a low mortgage payment. You may benefit from the interest paid at tax time. Just ensure that you don't have a penalty for paying off your mortgage early in case you can do that in the future.
With $24K standard deduction, even taking $300K mortgage will result in just 9K interest annually at 3%, + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation. Do you still see any benefit to take this route of paying $200K down and try investing the remainder at market?
Having a very low mortgage payment is easier to pay in case you loose your job. Check out this article to help you decide. https://www.doughroller.net/mortgages/5-reasons-never-to-pay-off-a-mortgage-early/
Always take a mortgage. Use the banks money at 3%. Put your savings in an index fund for 6-10% IRR. speaking from experience.
But OP thinks there is going to be a market crash.
Value of house will go down in crash too.
Make 20% down payment or little more to avoid mortgage insurance. Deduct the interest in tax return. Keep the rest in liquid assets.
With $24K standard deduction, even taking $300K mortgage will result in just 9K interest annually at 3%, + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation. Btw, what do you mean by liquid assets?
So you have 500k vested stock in Apple that you haven’t sold? Why not sell and diversify in the market?
Yes Sir, December’s crash is an eye opener. Planning to diversify in VTSAX and VBLTX - Simple path to wealth.
Gotcha. Yeah I would at least take a portion out of apple, but sounds like you rode the bull market so props on that. Interesting thread and it’s crazy how easy it is to buy a house in Austin. In all seriousness though I would pay someone who specializes in this to lay out the numbers and pros and cons. They might have info you aren’t considering. People on blind certainly don’t know anything about finance lol
Buy the house for cash and get a better deal on the house. A mortgage you either give the money to the bank or the government so why not just own your house and have no payment...
Ok the first one to suggest for Cash purchase. Why did you gave up on the mortgage alternative if the same money can be invested in stock. Trying play devil’s advocate here to get more info to support cash purchase. Btw, how much better deal can be bought with a cash purchase?
I'd buy all cash for piece of mind - not worrying about losing your job (well, worrying less) and/or being under water on the house
House in 350k in the bay?? Is it a mobile house?
Buy all cash, you are going to have more money in the future anyway. Op, how old are you? Any family?
Thanks.
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$300k in savings. If not hysa you've already been losing money.
Yes, 2.56% APR
If the expected return from market is 7% and interest is 3% then you will always make more money by not paying full cash.