My friend and I are in a debate
You have 400k and you're buying a house that is 300k
Is it more advantageous for you economically to pay for the house completely in full or pay for it over time?
>>1144549
pay over time
you could buy 10 houses for 400k on margin. you just need the cash flow to support the mortgage payments.
>>1144549
No. Over time, you would spend more through interest than you would have, had you simply bought the house in full.
this makes no sense, you're clearly going to spend more money paying off your mortgage than you would make from the investment of the 300k
>>1144549
Obviously it is better to pay it in full or you will pay extra because of the interest on a mortgage loan. The extra $100k in cash is more than enough to reinvest and earn money on.
>>1144549
it depends. Will you live in it? Will you rent it? What will you do with any money that's left over?
>>1144572
>wiping out your entire savings account
Bad idea
>Investing while having money to fall back on, reinvest etc.
Good idea
why is this so hard for you cucks?
Essentially the question is whether you can make more % by investing than the interest of your morgage.
>>1144578
Essentially
Invest in a fund that pays more than your interest on your mortgage.
Depends on the contract. If its set, then its objectivally better to pay it off over time so you can invest your money. There are exceptions though, like raising your credit score, but that wont help you leverage over 20 grand.
This is fairly basic finance, i assume you and your friend ate retards
>>1144572
Like the other anon said, it depends on the circumstances and what other investments / income you have and if it will be your place of residence or not. Real estate in general has been a fairly good hedge against inflation for the last century (unless you bought at the height of the 2006 bubble). It is, for the most part, an appreciating asset that can generate income. When you "pay over time" or open a mortgage loan you usually no longer are able to hedge against inflation because the interest on the mortgage is a higher percentage than annual rate of inflation. If you can afford it, it is almost always a good idea to buy real estate instead of on loan.
>>1144582
thanks
>>1144556
>not paying a set price for a house when you arent using a loan
>paying interest on your own money
What the fuck am I reading?
>>1144549
Depends on what kinda mortgage rate you get.
Great rate and it would be better to just take the loan. Inflation is going to devalue money but you'll be locked into that loan rate for 20 or 30 years. On top of that you get tax breaks for paying on a mortgage that you don't get if you own a home outright. On top of that you have extra money that you can play with for all kinds of investments.
I'd say if you have half a brain, just take the loan then use the extra money to make more money.
>>1144618
>I'd say if you have half a brain, just take the loan then use the extra money to make more money.
tru
>>1144618
What would you consider a good mortgage rate.
>>1144618
>this entire fucking post
Firstly, there is no loan at all, you have 400 grand. If the homeowner wont sign a contract accepting a set price and cash per month, then you dont buy the house.
Secondly, inflation works for you here.
Thirdly, you only need the down payment, then you have 300+ grand to invest with no interest.
3/10 i replied seriously
>>1144673
lets just take it easy there buster
>>1144549
Buying a 300k house is fucking retarded. You can get a big house in a nice countryside for 100k.
>>1144549
Seems to me like it's about the opportunity cost. If you're likely to blow the money on hookers and cocaine, then yeah you should spend it all on a house instead. If you're a natural leader and you have a great idea for a new business, then yeah get a 30 year mortgage and pay the minimums until the cows come home.
>>1144673
>Thirdly, you only need the down payment, then you have 300+ grand to invest with no interest.
And investments never go wrong. Just ask anyone on /biz/
>>1144966
Did the math. You need to be able to get at least 5% consistent returns on your investment (compounded) over 30 years in order for the mortgage to be the optimal option. Thats hard to do.
>>1144975
Not hard to do if you're investing in your own business that is already successful.
>>1144980
Possibly. Businesses aren't always ironclad money makers over long periods of time though. If there is a lull in business or the industry is evolving you would still be on the hook for the house payments. You would have to hope for optimal conditions in order to offset the mortgage interest.
>>1144549
At current rates, over time.
Buy two homes leveraged and use the rental income from the second home to cover interest
>>1144549
It depends:
Using a simplified example of $100 for a single year: if your interest rate is 10% you would be indifferent between owning/spending $100 today or $110 one year from now. Stated another way, $100 today is worth exactly $110 a year from now (at 10% interest.) You would be indifferent between the two.
But what is the appropriate interest rate for you? It depends on a lot of things but if you can get a 10% return running a business or investing, you would be willing to borrow money at any interest rate available so long as it's below 10% and you'd be willing to lend money so long as the rate of return is above 10.
Wait, not so fast:
An important wrinkle is that interest rates you earn/pay reflects risk. Investing at 10% is a lot more risky than borrowing at 5%. There's variability in investment income but your mortgage payment doesn't change. That's why the bank is willing to accept a low (but secure) income stream, if you don't pay them they get your fucking house. Should you really borrow against your house to play the market? Probably not.
Realistically interest rates do a pretty good job of estimating risk. Whatever rate the bank offers is probably an accurate reflection of the risk/return dichotomy. As is the rate of return on your investments. If that's all true, you'd be indifferent between borrowing and buying outright.
What's most important in all this is how your risk/return preferences compare to the market's. Someone who's more willing to accept risk than average would prefer to borrow at a low interest rate and put their money in the market where it will (hopefully) grow much more. A risk averse individual would pay off the house now and lay down under a nice comfy blanket, leaving all the market volatility to skydivers and racecar drivers.
So in summary, it depends.
Housing is a cash flow game
The name of the game is stability. if you can reach the stability point of your portfolio generating enough free cash flow to pay your insurance deductible per month you can ride your gains to the moon every month a house doesn't burn down.
>>1144975
>5% compounded interest over 30 years is hard to do
Am I on /pol/ or /biz/? There are some years i've made that in a single day.
>>1144975
You can't be serious
>I just did the math
Oh that's zesty, 6/10
I know we're all young, but this thread is embarrassing. None of you should go anywhere near renting or mortgage until you learn the basics of money. In all of my years of posting on this imageboard i've never seen so many dumbasses in a single thread.
ITT
>>1144549
There is no right or wrong answer with such little info.
Is 400k your whole net worth? Part of it? How big a part?
Do you have income aside the 400k? How much?
Do you already have liabilities, ongoing loans?
Once you answer all this, you can determine:
What type of credit rate do you have access to?
Only then can you chose which option is the best.
>>1144553
>>1144561
dunno about 10 houses for 400K but this.
2 houses, rent one out. You're collecting income paying down both mortgages.
In general the correct answer is you can take a higher return if you can accept higher risk. You're taking on risk when you borrow to access more capital. If your risk tolerance is highest then buy zero houses and invest all 400K yourself or 800K on margin
>lel buy $800K Ethereum
If the down payment of a mortgage is going to wipe out more than half of your savings then you aren't ready to buy yet.
If interest and mortgage rates remain low you'd be better getting a mortgage and using the money you didn't use in high yielding investments.
If interest rates and mortgage rates go up too high (i.e above what you could get investing the money however else) then you'd be better off buying outright.
