Am I being under paid? I have been working for a SaaS company for the last 6 months As a Director of sales and I am making 130k annually plus bonus. I am responsible for building/starting and managing 4 different departments; Partner program, customer success, inbound/outbound sales and marketing. This includes building strategies, managing day to day, managing a sales team, build out marketing plans, and also producing my own outbound sales, yadda, yadda, yadda.
Enthusiast
I’d honestly try to change the mindset. Otherwise you’re discounting the uncertainty of your retirement funds, which is now depleted by a large amount. It sounds like you’re buying a very affordable house, you have the cash for it.
If you’re worried about job loss that results in foreclosure, then just realize you can still pull it out of your brokerage/401k later if you really have to. Why are you worried about foreclosure but not lack of retirement funds?
Bingo. OP isn’t eliminating risk; he is merely shifting risk (and perhaps increasing net risk).
He is also concentrating his investment portfolio from various equities to just his house.
I have a different view on this them most people on here, but I also understand their point of view. Go with what gives you confidence. The house will still appreciate down the road and you can restart investing aggressively into your 401k to build it back up. For retirement, you can downgrade to a smaller house. Your 401k and rental income from your fully paid house can be your retirement fund. All this also depends on how old you are.
C1 having no mortgage does not affect that
Pro
I get it from a psychological perspective but it really makes no sense with interest rates the way they are. As long as you’re okay that you’re doing it for psychological reasons and not financial reasons, go ahead. Personally I would not feel comfortable wiping out my entire portfolio and would do a 15 year conventional or even an ARM and plan on paying it off within the fixed interest rate timeframe.
Thanks and yes, this is for psychological reasons only and not financially
You’d just be volunteering to NOT take advantage of the mortgage interest deduction..would not do that.
They may not be able to use it instead of standard deduction. I certainly would not be pulling money from 401k to buy a house for cash though
Never, never never!!! The losses over time that you will make by not being in the stock market over time will be excruciating and make your house cost you a heck of a lot more than you think.
Pro
I don’t understand the mindset. You control the asset (the house) by investing 20% and borrowing 80%. By paying cash, you are basically investing in a 3% note.
Conversation Starter
Think of it as diversifying your portfolio. You wouldn’t sell almost everything to be in just one stock. You could always put down 25-30% to have more equity.
Also, I borrowed 25k from my 401k because I had to. If you have to, it’s a great option. If you don’t have to, keep it simple.
Rising Star
There are tax consequences when selling stocks / liquidating 401 k etc
I am only taking 401k loan of 50k & not wiping it out completely
Pro
The house is never yours anyway. If your state has a real property tax
Please do not do this.
Chief
Do not take a 401k loan. That’s not cash.
This is free cash flow question and risk analysis case. Can’t you solve it?
I definitely would not pull all of that money out of the market. I am similar to you in that I want to be debt free and own things outright, but a mortgage, especially right now, is going to be accruing interest much more slowly than keeping that invested money in the market. And once you pay off the house with your current investments, you’re now back to square 1 on working towards retirement. Try to go for a big enough down payment to cover the PMI, and get a 15 year fixed rate mortgage that you won’t have to worry about for as long. If you want to pay that off sooner than the mortgage term, you can put extra money toward that as time goes on. But I wouldn’t make it a top priority over investing that money.
Rising Star
Seems like you don’t want to inconvenience yourself with the mortgage process and are willing to pay .5MM and take a 401k withdrawal to get around it?
Change your thinking.
I recommend you use a local bank instead of trying to do it yourself online.
Use cash if u can cut a sweet deal - ie 5-10% off if u paid cash & faster closing. Then u just refinance later...
I say do it, but I wouldn’t take a loan from the 401k. My mom did this post divorce, has no mortgage and lives free as can be. She was a big investor in the stock market and took some of those gains for the house to buy in cash, after all isn’t this what we are investing for? To live a debt free life? Go and do it!!
Take advantage of the lowest mortgage rates we have seen in a very long time! You can make a higher % in the market. Long term investing.
When your home is paid for completely you can start living…don’t listen to the haters, fact of the matter is that you don’t have mortgage payments or rent payments all that money can go into your retirement.
When your home is paid off you can actually start living your life to the fullest
Bad financial advice. Maybe good psychological advise. It may make you feel better, but financially you will likely be much worse.