Quote:
Originally Posted by Run Silent
It is your money, not mine. You are welcome to spend it however you see fit. He asked for advice. As a CPA, I gave him some.
Financing any purchase over 30 years is a terrible use of capital. The interest on a 30 year mortgage versus a 15 year mortgage is nearly double. The PV of the FCF on that interest expense is in the millions for an average purchase price of $350K.
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I just ran some numbers - if I go for the 15 year home loan, I end up with just shy of $200K more equity in 10 years ($196K to be exact). Nothing to sneeze at.
If I put the difference into my investment account (returning a consistent 11% per anum) compounding, I come out with an extra $273K (pre tax on interest however). Even allowing 25% income tax on the interest, I end up with about $230K.
Avoiding debt is not always advisable when you have higher interest paying investments available.