We’re looking to purchase our first home, a weekend property priced at $900k, and we’re uncertain about how much to put down versus finance. Here’s our situation:
We’re looking at a 6% interest rate.
We have $200k in cash and $700k in stocks (our retirement savings are separate and well-funded).
Household income is around $450k-$500k per year, with relatively low monthly expenses of about $8k.
Given the current interest rates, the need to potentially sell stocks and pay taxes, and our current expenses, how much would be wise to put down versus financing the home? Any advice on balancing these factors would be greatly appreciated!
Even though it might be the first home your family member is purchasing, since it’s a weekend home, the lender may require a minimum of 20% down. Additionally, you might not get a 6% interest rate.
I hadn’t considered that the house isn’t their primary residence—good point. Would you suggest putting more than 20% down, or is that enough? They were told the rate would be 6%.
How do they have $500K in annual income and minimal monthly expenses but less than a million dollars in assets? That doesn’t quite add up.
Regardless, they’ll likely need to put down 20% plus cover all the closing costs. And unless they claim they’re living there full time, they probably won’t get a 6% rate. Mortgages for vacation homes and rentals are typically more expensive.
Their fully funded retirement accounts aren’t included in the $900K liquid net worth mentioned. If they can secure a 6% rate, would you recommend putting down more than 20%? Should they consider selling some of their stocks and financing 50% instead of 80%?
Put down the full 20%. They have plenty of money to cover it. They might even consider putting down more than 20% and then pulling cash back out when they refinance after rates drop enough to make it worthwhile.