re: Percentage of net worth "invested" as equity in your primary residence?

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I've inherited a little bit of money from the passing of a relative. It's not life changing money, and most of it isn't cash, it's in various investment vehicles.

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I would strongly recommend that you use it to permanently increase your income, vice immediately leveraging into a higher tier lifestyle.

:stepsoffsoapbox:

I think most people aren't "invested" enough in their primary residence - many on the Money Talk board run the min/max game where they demonstrate how stupid it is to prepay your housing costs, when the money can make X% more in the market. I cannot refute the raw dollars and cents portion of their argument.

However, I also subscribe to the debt theory that I cannot lose money on finance charges I do not incur - that is an automatic yield that I have to do nothing to get/manage/profit from. The higher the rate of inflation, the more I incur in opportunity costs, but we've been at historic lows for some time.

Therefore, I think 20% down versus the value of the home is your starting point - a floor, IF that's what you ultimately decide to do with this windfall. I don't see a problem with as much as 50% of one's net worth being equity in the home - you can get access to this using HELOCs, at reasonable rates, and still make reasonable progress towards paying the loan off.

I also advocate 15 year mortgages. Again the min/max people will scoff at this ("you're turning down free money") - maybe I am, in theory. But, in reality, I am paying more towards my principal than I pay in finance charges to the bank - almost from the very beginning. With a 30-year, you're paying mostly interest for several years.

But, if you're contributing the max to your IRA/401K, and have a 6-month emergency fund - I think you could dump all the remaining liquid assets into a down payment on this new house - again - can't lose money on finance charges you don't incur.