As for the outlook on housing, consider that we've just had the steepest housing correction in history and many people still believe the worst is yet to come. This sounds remarkably like the same people who were projecting home prices to shoot to the moon during the heights of the housing boom. No one can foretell the future, no matter what certifications they have. Your gut feelings are as valid as any.
The answer depends on your current level of income and hence your progressive tax bracket. But, from a purely financial returns perspective, you should only consider paying for this vacation home with cash if you have no other superior forms of investment alternatives at an equivalent risk exposure. Considering that mortgages are running at about 3-4%, you'd still have to pay something around 2-3% after receiving your federal income tax deductions. If you can find an investment that gives you a 4-5% return at a similar risk, like a CD or AAA corporate bond, then you should finance your purchase instead. Unfortunately, there aren't many opportunities like that in today's environment.
Find a "fee only" CFP that DOES not get paid on transaction commissions but only an asset management fee. You would buy "no load" investments that do not offer a commission conflict of interest. Non-CFP advisors may recommend financial products (and idiotic insurance investments that primarily benefit the broker) but hopefully your CFP will not be biased. Dave Ramsey's Endorsed Local Providers generally have a good track record.
A Realtor is not usually equipped to provide you with adequate financial, tax or legal advice. Realtors are basically salespeople and some with very minimal qualification, i.e. a mandatory 2 week training, high school diploma and passing a state exam. Stockbrokers also only need to pass an exam and have a high school diploma. A CPA has significantly more training and a CFP also must show a certain level of expertise above that of a stockbroker.
So it's always a good idea to look for "genuine" advice and Realtor Tina has a good suggestion to make sure the person offering advice doesn't have a conflict, i.e. being paid on a "commission" basis -- like a Realtor does!
All the best,
If you can risk the money of another (the bank) but benefit from all the gains (housing appreciation, joy from the house, etc) by only paying 3.5-4% interest on that borrowed money, why would you risk your capital to do so? If the house collapses in value you will not be on the hook, the bank will. If they are willing to lend you that money at a record low interest rate then by all means take them up on that offer and mortgage the house! Then turn around and invest that money and you get a double whammy---equity appreciation in the house and equity appreciation on your liquid 170K.
My best suggestion to you is to contact a Certified Financial Planner to help you evaluate your finances and your best options.
You can find an Endorsed Local Provider recommended by http://www.DaveRamsey.com
Just make sure your adviser is not a mere Stockbroker Salesperson but highly qualified and has earned the CFP designation.
All the best,