Date: Fri, 16 Jan 2004 10:56:52 CST
From: Ignoramus28064 
Newsgroups: misc.invest.financial-plan
Subject: Re: buying a house with cash
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In article <20040116060928.19387.00000041@mb-m26.aol.com>, SizzleMP wrote:
> I just recently entered into contract for buying a $490,000 house. I recently
> put my house on the market and to my surprise I had gotten an offer in a couple
> of days which I accepted for $430,000.  I was originally going to take out a
> mortgage but after doing some calculations I could actually buy my house now
> with no mortgage and still have roughly $40,000 in the bank.
>  I know everyone says why would you want to pay cash for a house and tie up
> your money, plus the tax write-off advantages, but in my opinion, the best
> mortgage is no mortgage, and the advantages are immediate: you don't pay
> anything to the bank which in my opinion far outweighs the tax-write-off
> advantages. I do not consider myself a lavish spender so $40,000 in the bank
> would go a long way in the first year or two. Plus, if I ever do need cash, I
> could always take out a home equity loan which would be no problem since I
> would own the home 100%.  I was just wondering what everyone else thinks?
> 

The tax writeoff advantage is of very marginal value: it is better,
tax-wise, to own money on a house than on something else like a
vehicle. So it's better to take a higher home mortgage but not have to
pay interest for a car. 

Other than that, the mortgage interest deduction means that your
mortgage costs slightly less than it otherwise would, but it still
costs you and if you do not have to pay, do not pay.

Another advantage of owning the house outright if you are single: if
you marry someone, the house remains your separate property, although
the exact situation depends on the state. Your spouse may acquire
certain non-property rights to the house though.

Since you don't have to pay mortgage, your $40,000 savings goes much
further towards making sure you can survive unemployment, so you don't
need as much savings as would someone who must take a mortgage.

A low mortgage amount also would make it relatively more expensive to
arrange the mortgage, pay appraisors, yada yada yada. When mortgage
amount is high, a mortgage broker may want to pick those expenses,
hoping that the commissions will make it worthwhile. For a low amount
mortgage like the one you are contemplating, there is less chance of
that. So you will pay $1500 or whatever to arrange a $40,000
mortgage... not wise.

So, all in all, I suggest not taking the mortgage and not wasting your
time on that.

i