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invest or down payment?
Old 07-02-2017, 06:20 PM   #1
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invest or down payment?

Looking for opinions for what to do with about $150k. We will be moving early next year and expect to make about that much off the sale of our home and property. We will have to buy a new home when we move, so one thought is to use most of it as a down payment. However, I am also considering putiing it into an investment account. Any suggestions for the best way to reallocate that money?
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Old 07-02-2017, 08:57 PM   #2
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Looking for opinions for what to do with about $150k. We will be moving early next year and expect to make about that much off the sale of our home and property. We will have to buy a new home when we move, so one thought is to use most of it as a down payment. However, I am also considering putiing it into an investment account. Any suggestions for the best way to reallocate that money?


My answer is always the same when people are torn on this issue. Go 50/50 and be happy you were half optimized by the math and half safe and happy by less debt.
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Old 07-02-2017, 09:28 PM   #3
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What will your interest rate be on the new home? That is the rate of return you will enjoy risk-free if you use the $$$ as a downpayment.
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Old 07-03-2017, 03:15 AM   #4
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What will your interest rate be on the new home? That is the rate of return you will enjoy risk-free if you use the $$$ as a downpayment.
This is how I would look at it. My house is paid off and it is nice not having the payment. It would also be a factor to look at how significant the $150K is to your portfolio.
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Old 07-03-2017, 05:17 AM   #5
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To me, liquidity is important. As Dr Roy said, it would help to know more about your total financial picture. I would not want to tie up a huge percentage of my portfolio in my house, especially if I could earn a higher return on my investments. We choose to keep a 30-year fixed mortgage that's about 30% of our home value at a 3.375% rate. No incentive to pay that off even though we easily could. Our average investment returns are far higher than that. Our payments are well within our retirement cash flow so we are not stressed about having a mortgage payment.

Only you can evaluate which would be optimal for you. Some people feel better with "smart" debt and a larger portfolio, while others feel better debt- free and don't mind that their portfolios and asset returns are lower than they could have been if they had chosen mortgage debt.
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Old 07-03-2017, 05:33 AM   #6
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How expensive is the house you are buying? Will the larger down payment keep you out of a jumbo loan and/or give you a better rate?
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Old 07-03-2017, 06:21 AM   #7
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Do you currently save for retirement and if so, how much? Depending on your situation, you might be best off to go with a lower down payment and increase your tax-deferred retirement savings and invest in equities and use the $150k to support your living as needed. Over time, you'll save on taxes, get a great headstart on retirement savings that will compound and a higher interest deduction.
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Old 07-03-2017, 07:48 AM   #8
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As other more experienced members have indicated, your particular answer depends on other variables.

I can tell you that I bought a new home in 2015, and I put 50% percent down. In hindsight I would have made more money if I had put 5% down and invested the rest in index funds. However I am glad that I owe less on this house and as crazy as it sounds I look forward to paying it off....
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Old 07-03-2017, 08:01 AM   #9
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I can tell you that I sleep better at night knowing that I have a percentage of my portfolio liquid in Laddering CD's.

Good luck and congrats....
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Old 07-03-2017, 01:54 PM   #10
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If your going to get a new house next year, is it a step up? If the new house is way more money I would NOT put it in the market. We get a big correction and your 150 is now 120. Keep it in a money market/short term CD you might want to get your hands on it. If you have no intention on touching this 150, throw it in the market.
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