I would assume very few of us are able to plunk down half a million dollars cash for a new home. However, you might be in the situation where you could take the money out of your retirement fund, or some other way.

Should you? Or, should you borrow as much as you can, seeing as interest rates are around 6% for a fixed-rate mortgage loan?

Fortunately, someone has done all the work for you.

Question: “I am buying a house for $180,000, which I could pay for by selling assets, but everybody tells me to leave my assets alone and take out a mortgage. Their advice makes me nervous because it is always based on generalities, such as ‘you want the mortgage as a tax shelter’ or ‘you should leave your investments alone.’ They don’t know anything about my tax status or my investments. Is there a better way to make this decision?”

Answer: There is a better way. Use a spreadsheet called “Future Net Worth,” which can be downloaded from my Web site.

The spreadsheet allows you to measure your future net worth on the assumption that you pay all cash, then measure it again on the assumption that you take a mortgage, and see where you end up in each case. The spreadsheet calculates your net worth year by year in both cases.

There is a cool spreadsheet attached which you can use to do an analysis of your own situation.

Future net worth depends on how home is financed – By Jack Guttentag, The Mortgage Professor, by way of The Boston Globe

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Updated: 1st Quarter 2018

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