Would you buy a house for a cash just to get a peace of mind?
Let's say you need it for next 12 years until your kids graduate, schools are good, etc. Would you pull a trigger? What would stop you from doing so? Thanks.
Who do Medallia hire? Your paragraph makes zero sense. Spell it right first.
I hope snap hires good teachers. What's wrong my friend?
Yes. “Markets go up and down, but land and house stays with you "forever".” - this statement is not that accurate though. House price can go up and down as well. So when you buy matters as much or more than how you buy it. Best time to buy with cash is when mortgage rates are high and house price is low.
That is only if you look at this deal as an investment. In my case I want it to be my home at first for as long as possible. Eventually, when I feel like traveling around the globe let's say, I might sell it and if I sell it for more - that's good and yet optional.
I would do it however, any financial advisor would advise against it. The idea is take advantage of lower rates and use cash in hand to earn higher gains. Also, it is super easy to pay off the house but during a recession it might be difficult to pull that same money out.
Leverage is your friend.
I would personally like to have no or very low mortgage balance. Just for the peace of mind. That being said my primary residence does have a mortgage even when I can pay off the remaining balance. My interest rate is just 3% though.
What peace of mind does cash buy you vs a mortgage?
If you answer “yes” to all of these things, then it makes sense to dump it all into a cash purchase: - Do you have a 1-year (minimum) emergency fund of living expenses saved up in a low-risk place? - Will that money be untouched by the purchase? - Are you already fully funding your retirement accounts? - Will that funding remain unchanged by this purchase? - is the interest on your mortgage payment higher than what you could reasonably expect to earn by investing the money into the market over the time you expect to own the house? If yes to all, a cash payment makes sense. If no to ANY, then you have more important things to do with your money.
I understand your view about paying off home, because you can. I was in the same boat when we were living in a different city and the house prices are so low. In the Bay Area, it does not make sense unless you already have a net worth of > $10M to pay off for a home <$3M. You always need to have cash in hand and invest it. The returns from the market will be higher than 4%(30 year mortgage fixed rate) and you will also get some tax benefits. Have some manageable monthly mortgage amount, also do not forget about high house taxes you will have to pay once in every 6 months, depending on your property price.
Did just that. Payed that sucker off and could not be happier. One main reason for me was that I could not stand to pay several thousand dollars every month in interest while market was doing what it pleases. Guaranteed expense vs hypothetical return thing just was not for me. Also the flexibility you get, I have way more cash on hands now, which is up to me what to do with it. And as you said peace of mind - can’t put price on that. No matter what happens to me, stock or job market, my family will always have a roof over their hands. Knowing that is priceless!
This. I paid off my house in another state (way too little compared to Bay Area) and it felt great. If you’re doing it as a real estate investment, then the mortgage can be deducted as expense for tax purpose. For a house that you and your family to live in, it’s nice to have the low expense guarantee (aside from property taxes, HOA, and ongoing maintenance).
Both are great and supportive comments. Thanks people.
Put down 20% on the house, put the other 80% in index funds (cost average into the market over 3 to 5 years), then watch your returns on the index funds far exceed the interest you are paying on the mortgage.
I can still do cost averaging with more money in my hands every month as I wouldn't pay for mortgage. Question is - if you had a chance to pay it all upfront, wouldn't you take it? Markets go up and down, but land and house stays with you "forever".
I'd cost average over a couple weeks with the mortgage.