Why finance if you can buy a home outright?
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I am buying a house soon, and I have $250,000 cash and a $43,000 total annual income for a family of 3.
The advantages of only putting down 20% and getting a bank loan apparently are:
1) you "leverage" your money
2) you get to invest the capital and make more
3) you have "cash flow"
4) tax breaks (but low income)
MY QUESTION:
Doesn't the interest you have to pay on the loan offset the gains made by interest from investing the capital? In order to know that this was the best option, you have to be sure to make more than 6% on the capital just to break even!
If I buy outright, I go down to just a couple dozen thousand dollars left, so my money doesn't work for me in a great way. But all of the money I made by keeping the cash would have been going to interest payments anyway, right?
OR... are there bonds, etc., that could _guarantee_ over the longterm a profit >6%?
One thing I may not be figuring correctly: how the amount of capital and the priniciple will change over time
Why finance if you can buy a home outright?What if you use that money to buy two houses, rent one out to help cover monthly payments and over the same time, have two houses.
I think the main reason people borrow is to invest the money at higher return.
Why finance if you can buy a home outright?Well I wouldn't if I were you. Another thing you have to figure in is inflation, taxes, and risk of investments. Very little risk in paying off your home. Plus you can just take the money you would have been paying towards a mortgage and have it automatically drafted from your checking account into investments.
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