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Originally Posted by barb1191
My advice would be to pay cash for the home where you know the money is safe and will appreciate. Regardless of the housing situation now, real estate is a far better risk, in my opinion. Why would you want the expense of a mortgage plus interest payments?
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While my plans are to pay cash, I think this logic is wrong. Your house will apreciate the same amount whether it is mortgaged or not. The real issue is whether you want to have the money work for you in some outside investment that will pay a return greater than the cost of the loan. This is basic Investment 101. Yes, there is a risk that over the lifetime of the loan the post-tax market return will be less than the post-tax interest paid on the loan. However, from a long-term historical perspective, this has not been the case. Returns in the stock market have exceeded the current loan interest rates.
As far as real estate paying better returns, if you really think so then the wise thing to do is to buy an investment property with the cash that you have on hand. That way you would have two properties that are appreciating.