Money Guy Show "Should We Liquidate to Buy a Home?"
Aug 26, 2024
Can liquidating assets for a cash home purchase lead to financial freedom? The hosts discuss the implications of owning a paid-off home and its relationship to smart financial rules. They also tackle retirement savings concerns and encourage proactive planning. A fascinating look at house hacking reveals how renting out parts of your property can ease mortgage costs. Finally, the balancing act between paying off mortgages and investing in retirement offers insights into informed decision-making for long-term wealth.
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Don't Cash Out Young To Buy A Home
- Avoid liquidating $300,000 at age 30 to buy a $300K house outright because you lose long-term compound growth potential.
- Use the Money Guy Wealth Multiplier to see what $300K could become by retirement before choosing cash over a mortgage.
Paid Home Is Stay Wealthy Behavior Not A Get Rich Move
- Paying cash for a home is a 'stay wealthy' behavior that reduces long-term risk but can derail 'get wealthy' progress for younger investors.
- With $300K available, putting 20% down preserves most capital while avoiding PMI and keeping money invested for growth.
Use A Big Down Payment And Keep Investing
- Consider a large down payment (example 20%) instead of full cash to avoid PMI and keep capital invested while retaining the option to refinance later.
- Continue saving and invest ~25% of gross income so extra margin can be used to prepay if desired.