to mortgage or not to mortgage?

[Hypersion]

With that small of a mortage you won't be able to right off the interest or land taxes.

So I vote for paying cash for the house.

[loanstar]

Hello folks!

My wife and I may be purchasing a house soon. The purchase price of the new house would probably be $50-100K more than what our current home is worth.

We own our current home outright, and have the money on hand to make up the difference. In other words, we wouldn't need to take out a mortgage.

My question is: are there any reasons to take one out any way, and pay it off quickly or immediately?

Thanks.

i don't see a reason, why take a loan when you have the money at hand?..
if in future you need the money, you can always refinance.

[JustDoIt]

I believe you should always pay with cash when you have the cash AS LONG AS you're not compromising your safety net (emergency fund). I think it's poor advice to rely on refinancing if you should get in a financial bind.

1. If the financial crunch is that you've lost your job, good luck finding someone who'll finance you.
2. If you do get financed, you're then paying interest on an amount you couldn't afford in the first place (which is why you sought out a loan).
3. If you've paid cash for your homes and had no other loan or debts in a long time, your FICO score will be low (and you know what that means when applying for loans).

The 3rd point is something I have a problem with in regards to the prevalence of FICO's use!

...soap box...
Our society relies too heavily on FICO and is getting lazier about common sense lending. Specifically, I'm thinking of the situation where a person has paid all debts back, paid off her mortgage, and has several savings accounts for different purchase goals. She pays for everything in cash and is so financially responsible that she has saved in advance money for big purchases like school, car and emergencies and doesn't have a need for installment loans or car loans. However, say this person receives a job transfer to a more expensive state, sells her current home, applies the earnings to a new home in the new state but still needs to take out a loan to make up the difference in home price. Her FICO is terribly low (if existent at all) because she has no current debt/loan records on file. What then?

She is charged a higher interest for not having a debt history on file. She is essentially being punished for becoming self-reliant and not carrying debt.

Our dependence on FICO is contributing in a BIG WAY to a culture dependent on loans!

/soap box

[Tree0164]

I would pay as much cash as you can for the new home. You don't want to drain your emergency fund so if you need to take out a small mortgage that is ok.

You sound like you are in awesome shape!

[Snoopy2645]

definetly dont take out a mortgage if you have the money to buy it outright you will start saving immideatly if you dont mortgage the house

[mobby]

I think you should not!

I don't think its a good idea to mortgage to payoff quickly

[myself]

...
She is charged a higher interest for not having a debt history on file. She is essentially being punished for becoming self-reliant and not carrying debt.

Our dependence on FICO is contributing in a BIG WAY to a culture dependent on loans!
...
/soap box

I have to disagree. A FICO score can be built up, without having to pay interest. For example, getting a rewards card(s) to pay for everything, but paying it in full would show a long line of paying on-time, and the lender will most likely raise the credit limit on the card(s). Thus, a long term credit history (in time), and a large amount of credit limit.

If she pays in full every month, she won't be carrying debt either, and will get her rewards at the same time. I can't think of anyone that tries to talk someone down in price for such things as gas, groceries, utilities, etc. So all of that could be put onto the reward card every month automatically, unless of course there is a fee associated with it.

[disneysteve]

So all of that could be put onto the reward card every month automatically, unless of course there is a fee associated with it.

I wouldn't even rule out reward cards that do have annual fees. Some of them give you nice perks that are more than worth the fee. For example, my Marriott card has a $65 annual fee, but once a year, I get a certificate good for a free night at a category 1 through 5 hotel. A night at a category 5 Marriott runs between $250 and $300. I'm quite happy to be able to do a little weekend getaway with my wife at a luxury hotel for $65. This year, we spent the night at a Renaissance hotel just outside of Manhattan. They even threw in free breakfast the next morning.

[myself]

I wouldn't even rule out reward cards that do have annual fees. Some of them give you nice perks that are more than worth the fee.

I agree 100%.