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Weekend country cottage---cash only?

Posted by polie (My Page) on
Thu, Sep 4, 08 at 15:08

I know a weekend country cottage is a luxury. Do you think it's OK to get a mortgage on one, or is it the type of thing that if you can't pay for it 100% cash, you shouldn't be buying it at all? I suppose if I knew real estate didn't go in violent up & down cycles, it would be less of an worry because then you could always sell your second home without a loss if you get in a bad pinch like being laid off for an extended period. By the way, by cottage I do mean something modest, not a big country estate or anything. Thank you!

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RE: Weekend country cottage---cash only?

Mortgage interest rates for property other than primary residence is higher. That's one consideration. The other considerations have to do with your financial circumstances, your net worth, your age, the size of your retirement nestegg, your financial responsibilities, etc. You really need a financial planner to sort all of that out.

But for starters, consider: (1) If you buy outright, you'll have a lot less ready cash, and selling because you need the money is not good -- you don't want to put yourself in that kind of bind; (2) Could you possibly rent the place at times when you don't use it? That would help pay mortgage and other expenses; (3) What would you do with the money you do not plunk down if you take a mortgage, and, assuming it will be invested, for what purpose(s) with what time horizon, and what kind of appreciation can you realistically expect and how does that compare with the mortgage interest (I assume fixed rate -- NO BALLOON)?

Sounds to me you need a fee only certified financial planner, not a broker whose only interest is in generating lots of commissions.

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