I am in the process of buying a house. I am a first time buyer. Of course interest rates are ridiculously low so going to get a fixed mortgage. To offer some context, I am financially secure, no real debts, substantial free income and my fico is well over 800, resident in Illinois, USA. I am in my early 50s, so retirement is something in the back of my mind, and I am turning down, a little, the aggressiveness of investments.
What I am wrestling with is whether to buy a house at (just for example) $500k with a 12% down, or $300k with 20% down And whether to do 15 or 30 year. Both houses would be more than adequate to my needs, I'd be buying bigger mostly as a sort of investment. The payments would be different, but let's say I have enough free income to pay for either and any not contributed to the mortgage would go into an investment account.
The smaller house has the advantage that the payment would be lower, and I may make a decent return in my investment account (though it is not tax deferred, so would be subject to taxes, which the house capital gain may not be subject to), more of my mortgage %wise, would go to principal, plus I would avoid paying PMI, plus lower property taxes.
The larger house has the advantage that any gains in value would be increased substantially through leverage, plus more money going to principle, but I would have PMI and less money to contribute to investment account.
Similarly, do I do 15 or 30? In that case by doing 15 I am paying down a very low interest debt in exchange for putting money in an investment account, so I suppose it is kind of like borrowing money at a low rate to invest in the market.
I would appreciate any thoughts or insight on this matter. How to find the balance between these factors: down payment percentage, and free money to invest elsewhere.