[Shimpy]

We are planning on buying a new home around the first of next year and am confused on how to pay for it. I could pay cash for it pulling the funds out of an IRA, but would have to pay 25% taxes. Second, I could maybe make a 25% down payment and make payments. I don't plan on living 30 years to pay off the mortgage and am not concerned if the kids get a home not payed off that they can sell and come out ahead. I'd rather have the funds available in case of emergencies. We're still working and need to sell our home which I'll put on the market in Oct. I'd like to buy a home there before selling this one so we can move directly to it. After we sell it we'll be able to put a lot more down, but the mortgage will already be set and I'd hate to pay more to redo the mortgage to get a lower payment.
Also the bond comes into question, should I pay it off up front or make payments on it.
What I can't figure out is pay cash and spend 25% on taxes to take that money out of an IRA or pay a mortgage at 5 to 6 % over hopefully many years of retirement.

[Bogie Shooter]

Have you ever thought of hiring a financial advisor or a tax accountant.
I would use caution on advice you get from an internet blog/forum.

[interested]

When looking at all the factors, don't forget loan closing costs. One of the fees that threw me was having to buying title insurance for the bank (in addition to yours if you choose to get it). We considered a $100000 loan and the closing costs for the mortgage alone were close to $4000.

[Boomer]

Originally Posted by silver stallion

................. We're still working and need to sell our home which I'll put on the market in Oct. I'd like to buy a home there before selling this one so we can move directly to it. ...................

Whoa, Silver Stallion,

About this sentence right here that I lifted from your quote above, I hope that you will be sure that if you do it this way, you are prepared to possibly own two homes, and all the associated costs, for what could turn into an extended period of time. Crunch every number that could be a part of owning two. Figure out where your money can best take care of you and what you need for the big picture. Not just the inconvenience of a second move. You might be fine with owning two or you could decide that there are worse things than moving twice. Also what you get for your first home could impact the choice you will make for the next home. Lots of things to think about, especially in today's market which is not over yet.

I realize that there may be some concern that inflation will have to hit mortgage rates sooner or later. Who knows? But there is more to it than just interest rates.

And remember there is cash and then there is cash flow needed to generate payments. You need to get all your numbers together and then sit down to look at them with a CPA who can show you how your taxes will work best and who can answer other questions about how to make your money work best for you.

Also, as I am sure you know, do not take financial advice from somebody who is trying to sell you the extra house. The salesperson may try to convince you that "now is the time" because to not do it now could mean missed opportunity. Yeah right. Missed opportunity for that person who wants to sell you an extra house.

I know I am not answering your question. I just had to jump in here on that "owning two" thing. Please get professional advice. At this point in life, the do-overs don't come by as often. Take your time. Crunch your numbers. Weigh the pros and cons. And ask a lot of questions of a professional who is not trying to sell you anything, like a mortgage or whatever. An hourly rate for professional advice before making this decision can be money well spent. I wish you the best.

Boomer

[njbchbum]

I agree with Bogie Shooter - seek professional advice!

Husband and I did a thorough review of our investment portfolio and expenses before we plunked down the cash for our villages home...but that is what worked for us. Regardless of the taxes we paid drawing the $$ out of deferred comp accounts, real estate is currently a better investment oppty than our banks were!

[ijusluvit]

I used to be skeptical. Not anymore. Like Bogie suggests, hire a financial advisor or accountant!!!
In fact this sounds like the perfect time to do it with all of the elements you mention that are part of the decision. You will not only learn some new things, but quickly eliminate choices you thought were good ones.

[BUC]

Sell your present house first. Then rent for a couple of months, while looking for your new home. Hopefully you will make enough on the sale of your house to pay for your new house in cash, if that's not possible consider a smaller or cheaper house. This is just my opinion.

[katezbox]

... and I talk this sort of thing over with other financial folks.

As many posters stipulated, there are a lot of factors involved. We don't have another 20 or 10 or even fewer peak earning years left to make up for a bad decision we make today.

A good financial professional will help you consider all the angles, crunch numbers using a few different assumptions and help you make a decision that lets you sleep at night.

While I tend to agree in general that now is not the time to buy a place without selling the one you currently own, I really don't know enough about your situation to give you the right answer for you.

Kate

PS - the fact that you posted this under the investment forum tells me you are thinking of this as an investment, which is good. Don't let your nesting emotions cloud your judgment.

[Shimpy]

Thanks everyone for your opinions. As I guessed when posting this question, I would hear getting professional advise would be the best bet and have decieded to do just that.

[spk7951]

Have to agree with two excellent comments. Think twice about your particular situation and how owning two homes, for what could be an extended time frame, will impact your plans. Also seeking advice from a financial adviser is a must.

We have two neighbors who have been trying to sell their homes up north for over 1 1/2 years now. One couple retired first and that is taking a toll with finances and owning two homes. The other couple do not see each other much cause she found a job here and he is still working up north until that house is sold.

[Shimpy]

SPK7951
I agree with you that owning 2 homes for an extended period of time can be a drain on your finances. Anyone who has their home on the market for 1.5years is asking too much for their home, probably because they have to. I have enough equity in mine that I am convinced that I can make a fairly quick sell and still clear enough profit to nearly pay for the new home in TV. I've done a lot of research on homes in this area (Boynton Bch. Fl.) and can list the home and probably sell it within 4 months. To be on the safe side, I've decieded to wait until it is sold, rent in TV or nearby and then buy in TV.

[villages07]

Les,

That is a smart approach. Once you sell, you could be in a new home in TV within 30 days (or less) and rent in between. The bigger variable is selling your existing house. Finding and closing on a house here is a much easier prospect.

[Boomer]

Originally Posted by silver stallion

SPK7951
I agree with you that owning 2 homes for an extended period of time can be a drain on your finances. Anyone who has their home on the market for 1.5years is asking too much for their home, probably because they have to. I have enough equity in mine that I am convinced that I can make a fairly quick sell and still clear enough profit to nearly pay for the new home in TV. I've done a lot of research on homes in this area (Boynton Bch. Fl.) and can list the home and probably sell it within 4 months. To be on the safe side, I've decieded to wait until it is sold, rent in TV or nearby and then buy in TV.

Hi Ho Silver!

Glad to hear that you are rethinking that idea of owning two when you really want only one. I think this market will be with us for a long time. Or at best it will level out at some point. I do not see a spike any time soon. (But keep in mind that I do not know what I am talking about. I am not a professional financial adviser. I just like real estate stuff.) But still, I'll bet you do just fine when you go in to buy after selling the first one. Like I said, there are worse things than moving twice. And besides, you would not even have to truly move twice. You could store the stuff you want to bring. Rent in TV. And take your time while you visit your money in the bank.

And btw, if that professional financial advice leads you to deciding to carry a mortgage, make sure you shop closing costs. I don't know how things are in Florida, but here in Cincinnati there is quite a variation in closing costs. A good friend of mine has gone through the same decision making process you are in, trying to decide whether to cash in investments and pay cash or carry a mortgage. The closing costs she found varied from a few hundred bucks to a few thousand for a solid fixed rate loan. Look around and compare closing costs along with interest rates.

Make sure that professional you use is paid by the hour and is not trying to sell you anything. A fee-only CFP or a CPA. I like my CPA. He does not try to sell me anything. And besides, he understands me. Or maybe it's because I understand him. Anyway, we are "of an age" and have been through the same economic history and understand where we are in life. I don't want to listen to a young pup money person who is wet behind the ears. I like the old dog when it comes to money advice. I guess because he knows what I am talking about. Well, enough about me. Good luck to you.

Boomer

[Shimpy]

Thanks Boomer,
I was going to consult my tax man who has been doing my returns for years now, but realized his expertise is taxes not financial decisions. First I'll ask him for a recommendation of a financial advisor and see what he says. It's really a fine line on if a tax accountant of 40 years can advise me on questions I have about finances. I don't see the distinction between a financial advisor and a tax consultant. They are both aware of investing and spending to your advantage.

[Boomer]

Originally Posted by silver stallion

Thanks Boomer,
I was going to consult my tax man who has been doing my returns for years now, but realized his expertise is taxes not financial decisions. First I'll ask him for a recommendation of a financial adviser and see what he says. It's really a fine line on if a tax accountant of 40 years can advise me on questions I have about finances. I don't see the distinction between a financial adviser and a tax consultant. They are both aware of investing and spending to your advantage.

Hi Silver,

About that fine line between the two, tax advice and financial advice, I know what you mean. Your tax guy can tell you stuff, and then, if you still need to know more stuff, he can tell you who can tell you more stuff. Sounds like a plan to me.

I have owned 7 houses, one at a time. So I became a little familiar with some of the things that go along with a sale and a buy.

You probably already know this, but in case you don't, I just have to throw this in here. The tax law changed in the late 90's regarding profit on the sale of a primary residence. It's not like it was back when it was a much smaller, once in a lifetime, exclusion. The change in tax law, more than a decade ago, is a whole lot friendlier. You can now sell your primary residence, buy something less expensive, and keep a serious amount of change without being taxed on capital gain.

Like I said, you probably know this, but in case you don't, here is a link to an article that explains it. (I have made a couple of people happy by telling them about this. People who had been in their homes for many years and assumed the cap gains still worked the old way.)

http://www.bankrate.com/finance/real...-owners-1.aspx

Well, here I am blathering away about taxes and I am not qualified to do so and you did not even ask. Oh well. I just like to help people find information. (Hey, maybe I need to go back to work. -- NOT!!)

Boomer