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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Ridgeback on February 19, 2017, 04:42:09 PM

Title: Current house is paid off...buying a new house. MMM newbie here. Strategy ideas?
Post by: Ridgeback on February 19, 2017, 04:42:09 PM

Hi,

I have a house, free and clear. It's worth $220,000.

I just bought a new house, I close in 30 days. The new house cost me $259,000 @ 3.75 % interest for 30 years, no down payment.

I have googled and searched through the forums and have read a ton about the debate of paying down the mortgage vs investing.
Here's my take:

• Dump the $220,000 from house #1 onto the new property then race to pay off the remainder.
• Dump the $220,000 from house #1 into an investment which should return more than the 3.75% interest rate.
• Or perhaps a hybrid approach?

My basic question is, does $220,000 raw cash have the monthly staying power to cover the mortgage payment, if invested into something such as Betterment, Acorns, Hedgeable etc?? I'm not quite confident of my usage or choice of an investment backtesting calculator to determine my monthly return on my investment. Or am I totally missing the boat here, and should be doing something more intelligent?

For background, I have a maxed out 401k, ROTH, and an HSA.
I also have robo-accounts in Betterment, Acorns, USAA and Hedgeable.

I really appreciate it,
thank you

Title: Re: Current house is paid off...buying a new house. MMM newbie here. Strategy ideas?
Post by: waltworks on February 19, 2017, 06:50:28 PM

In general, I would avoid paying off any debt at a rate that low and invest the money (however you like to do that) instead.

You can find reams of debate on this here and elsewhere, though. If you really enjoy not being in debt at all, by all means throw all the money at the mortgage. If you prefer to optimize your finances, invest the money and pay off the loan as slowly as possible.

-W

Title: Re: Current house is paid off...buying a new house. MMM newbie here. Strategy ideas?
Post by: SwordGuy on February 19, 2017, 09:00:51 PM

I have the same thing I'm working on.   15 year fixed, 2.75%, 180k.

I did up a spreadsheet to help me figure it out.

I uploaded it on my journal with your numbers filled in.

Warning:  We need folks to double-check it, just in case I've made a mistake.

http://forum.mrmoneymustache.com/journals/sword-guy's-journal/msg1439925/#msg1439925 (http://forum.mrmoneymustache.com/journals/sword-guy's-journal/msg1439925/#msg1439925)

Title: Re: Current house is paid off...buying a new house. MMM newbie here. Strategy ideas?
Post by: Ridgeback on February 19, 2017, 09:07:41 PM

Very interesting! Thank you! I need to go through this and dissect it for my own education.
I appreciate it!

Thank you!

Title: Re: Current house is paid off...buying a new house. MMM newbie here. Strategy ideas?
Post by: Ridgeback on February 19, 2017, 09:09:04 PM

@Waltworks,

Thank you, I am going to study some more on this strategy and see what I come up with.