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On 16 Sep 2006 18:01:12 -0700, "speednxs"
<speednxsticket@earthlink.net> wrote:
>Just compare the mortgage interest rate with the interest rate you get
>on your investment.
>
>But what about the mortgage interest deduction you say? Let say you
>have a 7% mortgage, you are in the 25% tax bracket and you can earn 5%
>on CDs. After the benefit of the tax deduction you are paying 5.25% on
>the mortgage. But you pay taxes on the CD, so your 5% return after tax
>is only 3.75%. You would have to make, you guessed it, more than 7%
>on the CD to do better than the mortgage.
>
>Most people cannot earn as much in a near zero risk investment as they
>pay on their mortgage.
On the other hand, he could use part of the cash as a down payment on
a second house. If he did this, it is almost certain that the income
from the second house would not equal the mortgage rate on the first,
at least not for years to come. Besides, there would be a lot of risk.
Nevertheless, many people do well using this investment strategy,
eventually perhaps buying a third and a fourth house, etc. So the
above calculations do make sense if you are looking at just the
immediate cash flow situation, but in a long term view it is more
complicated and there are pros and cons to both approaches.
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Re: Putting lots of $ down or not?
