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Subject:  To Mortgage or not To Mortgage Date:  5/15/2000  11:29 AM
Author:  timomimo Number:  21948 of 88820

I am trying to find out the "most Foolish" way of paying for my new home. I searched on "mortgage" but could not find a thread about this. Hopefully I am not rehashing an old topic. I saw some advice from TMFPixy to "run the numbers" but no examples.

I am 54 and have $128,000 from the sale of my previous home after a 20% downpayment on my new home. I can put this on the new home and have no mortgage. Or, I can finance $128,000 for 30 years at 8 3/4 percent ($1006.98 per month.)

I can invest $128,000 in a S&P 500 index fund and go on a 8 3/4% monthly withdrawal ($933.33). Make up the difference (1006.98 minus 933.33) out of cash. If the market
performs just average, the principal amount will increase as the years go by and eventually I will decrease the monthly withdrawal percentage.

I am willing to assume the risk of the market moving (the S&P average over a great many years). If the market moves up an average of .0067 of one percent per month, the principal will remain untouched.

There are also tax considerations I have not touched on. Any advice or links to same would be appreciated. Thanks. Tim.

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