USA Obtain a residential mortgage--yes/no vs taxes/investment calculator?

[Markg22b]

I searched for an online calculator that would resolve this problem to no avail. Possibly the ? is too narrow. So I'm posting the ? here since you folks would, I'm certain, face this ? all the time.

Assume a person (our daughter) has the fortunate and recent option to buy a home outright and still have significant funds invested. Apart from a moderate teaching salary income, she will have not insignificant dividend/capital gains income going forward.

The general (my) thinking is: get a mortgage, invest the $ that would go to an outright house purchase (given current low mortgage rates vs invested returns) instead of allowing it to sit in the house asset. In addition to preceding income you'll reduce your tax liability with offsetting mortgage interest, property insurance and points (if any).

However, I'm sure that there's a financial crossover point where the aforementioned mortgage doesn't make overwhelming $ sense. That's where the calculator comes in?

Mark

 

[bklynboy]

You don't need a calculator. Putting aside the interest deduction for taxes, if you assume you can invest at a higher return than the mortgage then this is the best option. I have always done this and I don't understand the notion that owning a home outright is a great deal - IMO its an opportunity cost that you are giving up but they never factor into the equation.

No different than companies which tend to issue mroe debt when rates are low even though there is no immendiate need for the cash - you can always pay it off if your monthly payment becomes a hardship.