Pay cash to avoid mortgage costs?

Question

Jeff Dulla · Answer

@J Berk If you are not interested in taking advantage of historically low rates, like a couple of people have said, then pay cash. Way more often than I would think, people talk about just paying cash for everything. In many cases, those statements have occurred over the last three or five years when a 30 Year Fixed rate hit near 3.25%. Many of those same people have since "cashed out" with a refinance at a rate 1.00% or more higher. The point being, if you are interested in investing more or do any realistic forecasting on debt you may incur in the near future, I think you would be hard pressed to debt instrument lower than where residential mortgages have been and are currently.

Secondly, not to talk you out of using Sofi, I am sure they are great, but there is nothing inherently special about the rates or "no lender fee", no closing costs structures they are offering. I have had the chance to compare my company and other mortgage banks to Sofi over the last year or so and they are no different and sometimes Sofi is more expensive. What you want is someone who will shop rates for you and handle the loan process in house. Outside of that, anyone can get you a structure with no lender fee, no closing costs, etc.

Jeff Brower · Answer

Finance. Rates are at historic lows. Use your cash to invest in vehicles that will earn more than the ~4% it will cost you to borrow right now. This is how you play the game to build wealth.

Andrew Johnson · Answer

@J Berk I'd finance.  Rates are low and you can always pay it off sooner (assuming not prepayment penalty).  In the beginning almost all of the mortgage payment goes to interest, which is good and bad.  The bad is that you aren't paying much down.  The good is that you can write-off the interest when tax time comes around.  So you get to keep more of the income from the rental.

David Benton · Answer

If I had very little skill in RE and no way of using the ~$200k to make more money, I would go with plan B. Plus what happens in 12-18 months when the cards require payment?