No. of Recommendations: 3
we have about 60% of our funds in the stock market and basically just wanted to diversify a little. So, we can either take money out of our credit union (which of course pays almost zero interest) and just buy the house with it. Or we can get a mortgage. We have been pre-approved for a mortgage on this investment property. Our credit scores are in the 800's, so no problem there. Interest rates on this mortgage will be in the 4% range, because it is an investment property (we have been told). If we buy it with a mortgage, there will be some additional closing costs - points, and appraisal, etc.

So, toss this around -- if we just pay cash for this house, it would be like getting 4% interest on our money (since no 4% mortgage) right?

Either this rental is very cheap or you are keeping way too much in cash. I would look for a better investment for your funds. We are currently earning about a 12% return on our savings in an account that has been set up with a low risk philosophy, since we are also close to retiring.

Personally, I would get the mortgage. Rates are going up and this opportunity will not likely present itself again in our lifetime, particularly since you will be retiring soon and obtaining a mortgage will become more difficult. And when rates go up, rates on things like CDs should go up as well, with you having the mortgage locked in at 4%. But you will have the funds liquid in you accounts ready for anything you need or desire, including paying off your mortgage if you wish.

IMO, not getting the mortgage now will minimize future opportunities. I would have absolutely gotten one on the place we paid cash for if I could have, but it was too good an opportunity to pass up.


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