Evaluating Cash Home Purchase vs. Mortgage for Young Couples

Joe Ash D should consider leveraging a mortgage to keep assets growing instead of liquidating them for a cash home purchase.

### Weighing the Options: Cash Purchase vs. Mortgage for First Home
* 🏡 Joe Ash D is contemplating whether to liquidate all assets except for retirement savings of **$40,000** to buy a **$300,000 home in cash** or to take on a mortgage.
* 💰 The suggestion is to use the **wealth multiplier calculator** available at moneyguy.com/resources to evaluate how the **$300,000 could grow by retirement age**.
* 📉 While paying cash for a home may seem appealing, it is crucial to consider the **long-term cost of liquidating assets that could appreciate over time**.
* 🏦 Current mortgage rates are around **6.5%**, but potential future rate cuts could make a mortgage more affordable, possibly around **5% to 5.5%**.
* 🔄 The decision should balance "**get wealthy**" behaviors, which involve investing, against "**stay wealthy**" behaviors, such as avoiding debt.
* 📊 Liquidating assets might provide a paid-off house, but it would **significantly deplete their resources**, starting them back at **$40,000** instead of building towards **financial independence**.
* 💡 A balanced approach is recommended, such as putting down **20% on a mortgage** to keep most of the money working for them while avoiding **PMI**.
* 🌟 By focusing on **building assets first**, they can enjoy the benefits of **wealth accumulation** and make **more informed financial decisions** in the future.

[Music] Joe Ash D has a question. He says, If my wife and I liquidate all assets except retirement, which is around 40K, we could buy our first home in cash for 300K. Should we consider this or take on a mortgage? We are 30 and 33 for some context. All right, I want to make sure I understand the context of this question. If we liquidate all of our assets except for retirement, so what he's saying is what he'll have left over is $40,000. Took it, yes. That means he's going to liquidate $300,000, right? That's the value of the home that he's talking about. And Joash says that he and his spouse are 30 and 33. Here's the very first thing that I want you to do. I want you to go to moneyguy.com/resources, and I want you to check out our wealth multiplier calculator. And I want you to take that money that you're talking about liquidating, that 300,000.

and I want you to put in age 30 or 33, or you can meet in the middle and do 31 and a half or 32. You can figure out the number, and I want you to see what that $300,000 has the potential to turn into by the time that you get to retirement. Because as much as we love being debt-free and as much as we love having paid-for assets, especially paid-for appreciating assets, you have to answer the question: do we love it at what cost? Do we love those things? And I'm nervous for someone so young liquidating money that's working for them to go satisfy what likely has the potential in the future to be relatively low-interest out. I mean, even now, I think the average mortgage rate right now is 6 and a half%. But let's say that we do see rate cuts, and there's an opportunity in the future where your mortgage could be five or five and a half percent. Is it more advantageous for me to prepay that?

mortgage and save that 5 to 5 a half% interest, or is it more advantageous for me to have $300,000 working for me into the future, building towards Financial Independence. What Bo is talking about is there are get wealthy behaviors, and then there's stay wealthy behaviors. Paying cash for a house is definitely a stay wealthy Behavior because it takes some additional risk off the table for the long term. But for a 30 and 33-year-old who actually asset-wise are way ahead of the curve right now, you have a head start or a leg up on the get wealthy behaviors. If you liquidate this, yes, you're going to have a paid-for house, but now a lot of those Army of dollars and reaching that critical mass of or bowling point of $100,000 will be now gone. I mean, because you're starting back with $40,000 trying to get back to the first hundred, so the money can start build growing upon itself. That's a bridge.

too far for me, so I, you know, look. I'm not a people go to extremes. You have your debt Crusaders that say just pay for everything cash, don't have any debt, and you have other people that say leverage everything, you know. So, because you got Dave Ramsey on one side, and you got Rich Dad Poor Dad with Kaki on the other side with leverage all the time. I think I'm a more balanced approach on that, and I think that's why people love us now. Probably The Sensational stuff gets more clicks, sure, but I think if you're making good, wise decisions and navigating it like it's your own portfolio, and you know what's important, maybe on this because you have such a head start. Instead of doing the 3 to 5% we talk about, that's for people just trying to get on the ownership train because that's how where affordability is on coming up with that first down payment. Somebody like you who has $300,000 of resources and assets, you could get to maybe you put down 20%.

there you go, but then you still let the majority of that money work for you. You avoid PMI, and then you still gain the right to refinance later. And then there's nothing wrong with once you said you put down 20%, and then you save and invest 25% of your gross income. If you have extra margin beyond that, you can still be a debt Crusader. I'm not going to get mad at you if I mean I still you. There's a reason in the book Millionaire Mission, and when I talk about step nine, I lay it out beautifully with three charts where I talk about your earning potential. I talk about your life, how you get squeezed on both your time, your resources, and everything, and you need as much affordability as possible. So, you know, so you need some grace in those early years, and then the ability once you're over, you know, probably in your 40s, if you're this far ahead at 33 and 30 in your 40s, you're going to be living.

your dreams, and you'll have the luxury of the stay-wealthy behaviors of even paying it down more aggressively. Just pay attention to those things because I want to make sure you get wealth before you start acting like you're wealthy. And I think a lot of people miss that when they become debt Crusaders and they're trying to pay off all debt when they really haven't built enough assets to where it can work harder than they can with their back, their brain, and even their hands.

Should We Buy Our First $300,000 Home with Cash?

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The Money Guy Show

Joe Ash D is considering liquidating all assets except for $40K in retirement to buy a $300K home in cash.

The advisor suggests using a wealth multiplier calculator to see the potential growth of the $300K by retirement.

The advisor expresses concern about the long-term impact of liquidating working money for a low-interest mortgage.

Paying cash for a house is a "stay wealthy" behavior, while leveraging assets is more aligned with "get wealthy" behaviors.

For a young couple with $300,000 in assets, liquidating that amount for a paid-off house could hinder their "long-term financial growth".

A balanced approach, rather than extreme views on debt and leverage, is recommended for making "wise financial decisions".

Avoiding PMI and gaining the right to refinance can help you make the most of your money.

Saving and investing 25% of your gross income, along with a 20% down payment, can provide extra financial margin.

The book "Millionaire Mission" emphasizes the importance of affordability and grace in the early years, with the potential for financial success in your 40s.

It's important to focus on building assets before trying to pay off debt aggressively.

Many people miss the balance between debt repayment and asset accumulation.

Wealth should be prioritized before adopting luxurious behaviors or lifestyles.