Should I get a new home with a mortgage or wait to pay it off in cash?

Asked by Trent, Outside U.S. Wed Jul 31, 2013

I own (no mortgage) a nice 900 sq. ft. condo built in 1972 in Westminster. Would like to get a home in the $200,000 range. Considering if it would be better to get a mortgage or to wait and save enough to buy a new place in cash. Also wondering if it would be better to rent or sell my condo. Especially since it is fairly old but it is in great condition. It is part of the Cottonwood Villas. I think I could get $900/month for it and probably $60,000 if I sold it. I would like to make the extra rent money but am worried because of it's age it may be much harder to sell in the future. Any advice is much appreciated. Thank you!

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Kevin Cooney, Agent, WHEAT RIDGE, CO
Wed Aug 7, 2013

Here is what you need to look at.

Do you want to stay in a 900 square foot condo, or are you willing to wait to save enough money. Let's look at it this way, currently you can get a loan for about 4.5% interest give or take. Inflation in this country stands right around 3%. If you look at it that way you will realize a loan is not a terrible idea.

Now if you are willing to save up for a home and wait, then I don't see why not. You just need to weigh what you would like to do. Remember, you can always pay your home off quicker if you get a loan.

I personally, would encourage you to rent your condo. $900 a month is decent rent every month and having that extra investment money is always great. It is also in a convenient location being near I-25 and 120th.

As far as resale the future in not predictable, but after the amount of rent you get it will be worth it. You will just have to make sure to maintain the unit and make sure nothing major is happening. Remember, any work that has to be done on your property is tax deductible. If you sell it now and own it free and clear, that is a good chunk of change to get you going on your new house.

These are all just a few things you can look at. Remember, I am not a CPA or a financial planner, so if you are looking for the exact advice on what you need to do with your money I would contact one. These are solely to give different perspectives.

If you want more information feel free to contact me.


Kevin Cooney
Keller Williams Realty
0 votes
Sally Grenier, Agent, Boulder, CO
Thu Aug 1, 2013
Kathleen brings up many good points. I think it would be wise to speak with a financial planner who can help you with the financial pro's and con's. But this is also a very personal decision. Are you happy living in your condo, or do you really want to be in a single family home? What are your other personal circumstances? Family? Pets? Are you physically able to take on the additional maintenance required with a house? (Lawn care, exterior maintenance, snow shoveling, etc that you don't have to do with the condo?) .

Real estate is an excellent investment. If it were me, I would keep the condo and rent it out. Some day that will be a nice little nest egg to have...or you could move back in when you're older and done want the maintenance of the house.
0 votes
Kathleen Nol…, Agent, Broomfield, CO
Wed Jul 31, 2013
The home loan interest rates are still very low, but they are starting to go up. You might find it prudent to invest your money in something where you can get a higher return than 5% which is where the home loan interest rates are heading. Also, mortgage interest is still deductible. A financial planner can help you weigh these variables.

The rental market is strong, but being a landlord does have responsibilities with it. Not everyone is cut out to be a landlord. If you have your unit clean, freshly painted and carpeted, you should be able to sell it whenever you want to.

Please feel free to call me if I can answer any questions for you.

Kathleen Nolan
Nolan Real Estate, Broker/Owner
0 votes
Robert McGui…, Agent, Denver, CO
Wed Jul 31, 2013
Hi Trent,

You have a lot of questions wrapped up in one. Annett'e's answers are good. There are so many variables here that it would be good to first speak with your financial adviser, then a really good lender, and then a good Realtor to go over all of your many options. The best thing about this is that you have several very good options. Further counsel will determine what your best options are for your personal and unique situation. Let me know if I can help. We are here to assist you with all of your real estate needs.

Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
0 votes
Annette Law…, Agent, Palm Harbor, FL
Wed Jul 31, 2013
The cost of borowing money today will prove to be much less than it will be in a couple of years.
Buying a home with 'cheaper' money, is a good idea.
However, there's always a however...
Your situation will dictate what will work best for you. Your situation includes:
How much is your money earning
How much is in saving.
The local sale and rental market.
Your skill, ability and resources as a landlord
Does condo rules contain any 'poison pills?"
What are the near term costs for maintainence of condo?
Wiill the management fees (if applicable) put you in a negative situation?
Are you risk oblivious, aware or adverse?
What is your potential for relocation in the coming ten years?
You are in an excellent position to establish a financial container for holding real estate that can be the cornerstone to your future retirement income and wealth. Look at ALL of your options. Chat with your financial planner or attorney regarding instruments of ownership that will create tax exempt status for your real estate investment property.
This is a complex issue and truly deserving a meet up with a real estate professional and attorney or financial planner.

Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
0 votes
Jenny Marie…, Agent, Aurora, CO
Wed Jul 31, 2013
It is definitely a sellers market so selling it is a great option, but sincerely it is your personal choice and both are great options. Please call me when you have a chance to discuss options to buy a new home as cash is obviously a better investment due to not paying interest, but you can also have a very low mortgage payment if you can put a significant amount of cash down. I work with very competent lenders who can advise you further as they are the experts for loan information.

Thank you,
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