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Buying for All Cash |
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We own a home free and clear that is worth about 400,000. We own nothing. We have purchase another house and would like to own that free and clear and would achieve that goal with the sell of our home and the proceeds going towards the other house. My question is: is it better to have a paid off home or to get a loan with the interest payments being about $1500 a month. What is the truth to the whole question of having a "tax break" vs. no mortgage? (loan 6% and we would be able to invest the monies a make appox. 5% which would be taxed) |
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There's nothing magic about having a mortgage. Forget the tax aspect -- while your other earnings would be taxed, you'd be able to deduct the interest you paid on the borrowed mortgage money, so that part is pretty much a wash. But if you feel you could count on earning about 5 percent with the extra money, you've got to figure you could earn more, 6 percent, just by putting it into your home instead of paying that much on a mortgage loan. There is, in addition, what is known as psychic income -- the satisfaction which you obviously take in owning a house free and clear. |
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Edith
Originally published on August 31, 2007 |
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