I’m looking to purchase a house sometime in the future in Las Vegas but I don’t know whats a better option. Paying the house in full or just putting a down payment. I’m looking to buy a $550,000 + home but I don’t know what’s a better payment method? I want to save some money in the end
For a first time home buyer: Is it better to pay off the house in full or just put a down payment?
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May
T E
May 2, 2010 at 3:55 pm
that depends on that, if you just put down the downpayment, whether you can earn MORE INCOME with your money not used to pay for the house and if so, just put the downpayment
Millie
May 2, 2010 at 4:17 pm
Make a down payment and invest the rest somewhere else. You don’t want all your money tied up in the house if the market goes down.
loanmasterone
May 2, 2010 at 5:08 pm
Most home buyers use the leverage to purchase a home. They put the required amount down as per the loan program under which they are approved.
Purchasing a home this way, you have a home you are paying off each month with the federal tax benefits as well as the money left in the bank you might use as you see fit. You are no worth what the house is valued at plus the amount you have in the bank. Therefore with the scenario as outlined you place 10% down on a $500,000 house which would be $50,000. Now you have a net worth of the $500,000 in the bank plus a $500,000 house therefore you would be worth a million dollars.
Paying off a house complete you would own the house, but you would not have those funds in the bank. Your worth under this scenario would be you would be worth at least $500,000 based on the value of the house and if you had any money left in the bank you would add that to your value.
In this instance I think I would let the system work for me, by placing as small amount down as possible, while leaving my liquid in the bank for my personal use.
I hope this has been of some benefit to you, good luck.
“FIGHT ON”
kyle
May 2, 2010 at 5:12 pm
If you have the money to pay for it all in cash that is most definitely the way to go. Unless you do not have another source of income or have not other cash. If you have any other debt, you should pay that off as well if you have the cash. While there are deductions on your taxes for paying mortgage interest it is not worth it to pay a mortgage if you can pay for it. Here is why. Unlike the last gentlemen explained your net worth does not double if you get the mortgage and have the cash in the bank. For it you pay off a $500,000 house and have some money in the bank with money coming in your net worth will grow faster in the long and short run. If you put only $100,000 down and have $400,000 mortgage your net worth is the same because the debt from the house comes off your total. Now to the biggest reason, the tax credit that you will miss out on by paying all cash. If you take a mortgage you are paying interest to the bank in order to borrow money and if you can write of all of it lets say $10,000 a year and get $2,500 back in taxes you spent too much. If you pay cash you lose that $2,500 of your taxes but get to keep the $7,500 in your pocket instead of giving it to the bank.
In the end I would pay as much as you can off right away. The only reason to keep some cash is to get by for a while and keep a emergency fund in place.