How Much to Put Down on Primary Residence

Question

I'm having trouble deciding how much of a deposit I should put down for my primary residence (or potentially buy it in cash). I'm mainly concerned with opportunity costs of locking up a significant chunk of cash.

Considering the below notes, how might you approach this decision?

A) I'm planning on living in the property for roughly 5 years and then renting it out after me and my wife grow out of the place.

B) The total price of the home is about 25% of my net worth and liquidity isn't much of an issue.

C) I'm a high earner, so I shouldn't be in trouble locking up the cash.

D. My LTR break-even point would be with a 50% down payment (with a 30 yr mortgage at 6.5%)

My personal thoughts are that a 50% down payment on a 30 year mortgage might make some sense. So I can invest the other 50% and I will likely cashflow the property after I convert it to a LTR (I'll hopefully be able to refinance with a lower interest rate).

Please let me know if I'm missing something here or if anyone has any input or disagrees with this brief analysis.

Thank you!

Account Closed · Answer

You have a tax issue. Done the way we do things, that issue goes away. I vote for investing.

Tatum Littleton · Answer

In short, I would put down as much as I can, and what would potentially cashflow in the future when you move out. From the information you gave, it seems you have analyzed that to what could potentially work. If you can put more down but be uncomfortable for a bit and get ahead, then I can see that making sense as well. It may mean you don't invest 50% like you mentioned but the refinanced mortgage will be more advantageous and likely to cash flow.

All in all, you know what you and your wife are okay doing to make it work. Of course, there is not a perfect right or wrong answer, it depends on what makes sense for you.