Date: Sat, 31 Jan 2004 21:52:33 CST
From: "JJ" 
Subject: Re: buying house with cash/follow up
Newsgroups: misc.invest.financial-plan
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Here's one other thing to consider (at least it's something I considered in
a similar situation).

How likely are you to add to that $40,000 you have left over?  How likely is
it that you will need to use it in the future?  (I know whenever I buy a new
house, there always ends up being something significant I need to do to it
or buy for it.)

If you pay cash for the house, then you need some of that money in the
future, you have to borrow against your house.  That's OK, but what if
interest rates are 10% or 12% when you need the money?  It's "your" money
(or it was), but now you have to pay someone 10% or 12% to get access to it.
Or in the worst case scenario, you lose your job or have no source of income
and no one will lend you "your" money!

You *know* you can have it now for a maximum 3.8% if you just stick it under
a matress, less if you invest it even in the most safe vehicles.


"SizzleMP"  wrote in message
news:20040131064214.04483.00001028@mb-m10.aol.com...
> Well after doing a lot of researching, I think I might be considering
taking
> out a big mortgage instead of buying my house outright.
>
> To refresh, I am in contract to buy a house for $494,000 and to sell my
house
> for $410,000. When the smoke clears, and after doing my math, I can buy my
> house outright and still have $40,000 in the bank. I thought this was
great to
> have no debt looming over my head. But then I said what if I did the total
> opposite?
>
> If I took out the max for a 30 year mortgage, $333,701 @5.5% then I would
have
> roughly $360,000 in cash ( after closing costs). The effective interest
rate
> after writing off the interest is about 3.8% ( assuming 31% federal+state
tax
> bracket). If I can take that $360,000 and invest it wisely, I can do
better
> than 3.8%. Also, it's very likely that  interest rates that banks offer
for
> savings and CD's will start to go up in a few years. I can do a lot better
in
> this scenario than if I had $40,000 in the bank after buying my house outr
ight.
> I was just wondering what evryone else thinks?
> I can
>