No. of Recommendations: 1
craigdoc asks,

Pleez help - I need advice on which scenario makes more sense

Total cost of a house is $280,000. I am 35. I intend to put down 70,000 and after keeping a fair amount of cash for emergencies I have 40,000 to invest.

Scenario one
Take a 30-year mortgage and invest the 40K in the stock market. After 30 years I will have paid off the house and will have had the 40K growing in the stock market

Scenario two
Take a 15-year mortgage which I cannot afford unless I use 5000 a year from the 40,000. After 15 years. I will have paid off the house but will then have none of the 40K left – however I will then have the next 15 years to save and invest as I will have no mortgage. The house and mortgage will also have cost me a lot less

Thanks in anticipation

I took Scenario 3. I continued to rent a cheap apartment, put all my money in the stock market, and retired in 1994 at age 38. <grin>

As far as scenario 1 or 2, it depends on if the stock market grows faster than the interest rate on your mortgage. If you look at the one hundred 30-year holding periods between 1871 and 2001, the best grew at an average of 13.40% per annum, the worst was 5.13% per annum, the median was 9.37% per annum.

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