Old house: No mortgage- but we have been wanting/needing to move. Est we can sell for 300k. should clear 275-280k after fees.
New House: 455k, we can put down 20%, bank approved financing the rest.
Made offer on new house- decided to not make a contingency of selling our current house because we really wanted to make ourselves more attractive to the sellers. We also didn’t want to sell our home first and have to move twice if new house did not close in time before ours sold. Spoke to realtor about selling our home and because of our location, worst case scenario, if it didn’t sell (unlikely) we can rent it out for approx $2k/mo (walk to schools and walking to rail to commute to city is key here). We have some cash saved up- so since we have no mortgage, we can cover taxes/insurance for a couple months in worst case scenario. Highly undesirable, but it would not kill us. And moving temporarily in between would cost us far more than that with the additional hassle of moving twice.
What to do?
Original plan was to take all $$ from sale of first house and pay down new house mortgage asap.
But with interest rates so low, and a tax deduction, would it be better to just invest that money instead?
Or only take part of it to pay down and part of it to invest?
Also what kind of mortgage?
30 year fixed? (just under 4% int) payments are fixed but can pay off early, just apply pre-payments as we want.
or 5 year ARM (just under 3% int) payments fixed for 5 years, then 2 point max cap. - from what I understand, ARMS are good for short term but you can’t prepay mortgage like in a fixed rate loan and shorten the term- is this right- the term stays the same? We plan to retire in this house and stay there. So ARM may not be ideal- but low interest rate for 5 years is appealing.
What other mortgage options should I consider? Pros/Cons?
What are other pros/cons to keeping mortgage vs paying down mortgage faster?
Currently we have no other debt. We will still have some assets after paying down payment (almost 100k) but we don't want to touch that $ unless there were something big that came up.
What other considerations are there? I'm on the fence as to what we should do.
TIA!!
