Re: Closing on a new house when paying cash
rshoffer,
It is somewhat of a personal thing (cash versus mortgage). I'm sure your advisers were assuming that your post-tax investment returns on the amount of your mortgage would be greater than the post-tax cost of the mortgage. Historically, they are probably correct. However, you also need to include into the equation the costs of getting the mortgage; looking at just the mortgage interest rate is insufficient. In our case, they total about $4,000 (from Citizens First). This includes things like loan discount fees, application fees, appraiser fees, title insurance (for the bank's policy). Of course, your advisers would probably say that over a number of years these upfront costs become insignificant.
As long as your investments are in things other than CDs and bonds, from a purely economic perspective your advisers are probably correct (in fact, I currently owe more on my house up north than I did 28 years ago when I bought it). However, I have never owned a home outright, and I want the emotional satisfaction of doing so.
|