How much money would I save, paying cash as opposed to mortgage?
June 4, 2007 · Print This Article
Mr. Spin asked:
$90.000.00 at 6.25% fixed rate for 30 years (not including taxes, fees, etc.)
$90.000.00 at 6.25% fixed rate for 30 years (not including taxes, fees, etc.)
I went to an online mortgage calculator and keep coming up with over 100K savings! Is this correct?
I do have the cash and signed the papers. People think I am nuts for paying cash, but I look at them thinking who is the real nut.
I am not worried about write-offs or investing the money. I have to live somewhere instead of an apartment. Most importantly, I want my kids (while they are young) have a place to call home, friends and memories.
If needed, I can get a mortgage and buy another house and rent it as apartments and break even for the next 30 year.
Kansieo.com
Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
It’s probably more than that. Do you really have $90,000 in cash to pay for a home? If you do - that’s the way to go - don’t listen to anybody who tells you that you should have a mortgage for a tax deduction - the money you save will be triple your tax savings - especially at the end of your mortgage where you are paying less interest and more principal.
It’s more than that. How much total would you spend in 30 years of payments? That’s how much you’d save.
If you financed a home for $100,000 , for example, you would end up paying close to $300,000 for it in 30 years. The true cost of the property is roughly 3 times it’s selling price when you finance it.
Great for you! Pay cash when you can.
You won’t get the tax write-off benefits. You will save but, I prefer to have my money work for me and would put that 90k somewhere else making more than 6.25%.
Maybe buy, another property with a mortgage, rent it out so someone else is paying the mortgage.
It depends on your philosophy - If you feel better about paying off your house, it should/will impact your financial outcome in business. The same thing should happen if you take out a mortgage.Technically, you should look at your age.
Paying cash is usually not only Nuts…it’s stupid.
If instead of paying cash, you had taken that money and invested it you would have most likely done better than 6.25%.
Hell, CD’s are paying between 5 and 6% right now. If you use a ladder strategy you could probably break the 6.25% mark on CD’s alone. Add in the income tax advantages and its usually a no-brainer to finance.
You’re going to save about $110,000 over the course of the loan. Just make sure you look at other options before you take 90K out of your pocket, in case there’s a better opportunity somewhere.
You need to understand the time value of money. Do you know what $90000 could do for you over the next 30 years as an investment? I guarantee it will be more than the appreciaton of your property. By having a 90000 mortgage at 6.5% and making even an average 10% return on your investment you are still way ahead to take the mortgage out and invest the money. Google “Time Value of Money” . Compound interest is a beautiful thing. Good luck.