- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Financing Philosophies for RE purchase
Posted on 1/26/20 at 12:17 pm
Posted on 1/26/20 at 12:17 pm
Curious of the opinions of finance professionals on the purchase of vacation home/recreational property in the range of $500K.
Options as follows:
--conventional financing with 25% down @ roughly 4.5% over 20 years
--refinance house ($250K cash equity available) and use for larger down payment. Currently 9yrs left on 15yr mortgage @ 2.625% ($255K loan balance); new terms would be 20yrs @ low 4% range ($510,400 loan balance). Finance the remaining balance over 20yrs @ 4.5%
--refinance house to get $250K down payment and pay balance in cash.
The last option would obviously result in least interest paid, but deplete cash reserves more than I'm probably comfortbale with. Like to keep more than that would leave on hand for unforseen circumstances or other business/RE opportunities.
Opinions on these options along with other ways one might approach would be appreciated.
Options as follows:
--conventional financing with 25% down @ roughly 4.5% over 20 years
--refinance house ($250K cash equity available) and use for larger down payment. Currently 9yrs left on 15yr mortgage @ 2.625% ($255K loan balance); new terms would be 20yrs @ low 4% range ($510,400 loan balance). Finance the remaining balance over 20yrs @ 4.5%
--refinance house to get $250K down payment and pay balance in cash.
The last option would obviously result in least interest paid, but deplete cash reserves more than I'm probably comfortbale with. Like to keep more than that would leave on hand for unforseen circumstances or other business/RE opportunities.
Opinions on these options along with other ways one might approach would be appreciated.
5
Posted on 1/26/20 at 12:58 pm to CountMeIn
I have a simple thought that says "you finance everything you buy" and by everything I even mean cash purchases.
Do the math for yourself but I would put the least amount of money into a deal possible and keep my reserves working for me not some other person or institution.
For those of you wondering about the quote, think of it this way. You have a bucket of money that you use to buy something. Once you deplete that bucket you don't have it earning for you anymore and you must save again to fill that bucket back up to whatever amount it was, so in essence you finance everything you buy.
If a large purchase such as a home in this case is bought and you put down a substantial amount of your money then you lose the % return on that money. So by "avoiding interest" you gave up your bucket. If the rate of the financed product is in this case apporximately 4% (several options) then can you earn 4% on your own money? Actually a little less because you have portion that can be written off. So you will have your "cash/investment" still earning for you and hopefully you will have a home that appreciates for you as well so at the end you will have two assets. Furthermore locking in the fixed cost of the home will have the effect of meaning the payments will even feel less significant in the later years as your income will probably be appreciating to keep pace with inflation.
Good luck on your decision. I would suggest finding a great planner in your area to help you come up with what is best for you.
Do the math for yourself but I would put the least amount of money into a deal possible and keep my reserves working for me not some other person or institution.
For those of you wondering about the quote, think of it this way. You have a bucket of money that you use to buy something. Once you deplete that bucket you don't have it earning for you anymore and you must save again to fill that bucket back up to whatever amount it was, so in essence you finance everything you buy.
If a large purchase such as a home in this case is bought and you put down a substantial amount of your money then you lose the % return on that money. So by "avoiding interest" you gave up your bucket. If the rate of the financed product is in this case apporximately 4% (several options) then can you earn 4% on your own money? Actually a little less because you have portion that can be written off. So you will have your "cash/investment" still earning for you and hopefully you will have a home that appreciates for you as well so at the end you will have two assets. Furthermore locking in the fixed cost of the home will have the effect of meaning the payments will even feel less significant in the later years as your income will probably be appreciating to keep pace with inflation.
Good luck on your decision. I would suggest finding a great planner in your area to help you come up with what is best for you.
Posted on 1/26/20 at 2:47 pm to CountMeIn
If me, I'd consider a 20% down payment, cash out refi, 30 yr primary mortgage.
2nd house, finance with the 20% down payment with a 30 yr mortgage.
I'd have to run the numbers to alter if necessary. But that's where I start. You can always pay more on your principal balance. That's me.
2nd house, finance with the 20% down payment with a 30 yr mortgage.
I'd have to run the numbers to alter if necessary. But that's where I start. You can always pay more on your principal balance. That's me.
Posted on 1/26/20 at 4:51 pm to CountMeIn
I would not include my first home in the equation. If all goes to hell, you still have that. Not saying I would ever walk away from my second home or debt in general, but no matter how good things are, not owing anyone on your primary residence - other than the government :eyeroll: - allows you to go back to small ball should life go off the rails. If you can consider a 500k home “small ball”. =)
Other than that, 20% down and you can take your cash and throw extra payments whichever way you want with dividends/interest.
Other than that, 20% down and you can take your cash and throw extra payments whichever way you want with dividends/interest.
Posted on 1/26/20 at 5:25 pm to CountMeIn
Do you plan on renting the vacation property? If so, it might not be a bad idea to use funds from your home and get an LOC as the down payment. Especially if rental income pays off the LOC. In 2014 I bought a condo in Orange Beach and took a LOC on my house to use for the down payment. The LOC provided additional benefits in that it helped as a reserve fund for unexpected stuff that came up apart from the condo and assisted in paying some of the kid’s college expenses.
This post was edited on 1/26/20 at 5:36 pm
Posted on 1/26/20 at 5:49 pm to CountMeIn
quote:
Currently 9yrs left on 15yr mortgage @ 2.625% ($255K loan balance)
Don't touch this.
quote:
refinance house to get $250K down payment and pay balance in cash.
There are other options to tab into your equity instead of refinancing.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News