I'm trying to decide whether to put a full 20% down on a new home (primary residence), which would eat up most of my cash from sale of current home, or do something like 10% down, 80% conventional (jumbo) mortgage, 10% HELOC.

I'll be netting about 150K from sale of current house, and purchasing a house of ~600K. With closing costs and 20% down, I'd end up with about 20K, which would probably fund some basic home improvements and/or go to my bank account as cash reserves. Alternatively, I could do what I described above and end up with more like 75K after closing.

I have fairly comfortable retirement savings (for being mid-30's) and everything is on track there, and also with kid's college fund. So, I'd like to think about riskier investments--such as investing in a small business (I have successful entrepreneurial experience) or individual stocks. But I'm not in a huge hurry to do any of that, and my next 6 months will probably be tied up with the home purchase and move.

I'm leaning toward just the simple 20% down, with the thought that I can always take cash back out with a HELOC in the future. This would keep my immediate payment as low as possible, and make loan approval simpler and less risky. On the other hand, interest rates are super low right now, and I could invest the HELOC money right away in something simple like a mutual fund that would probably do better than the interest I'd pay on it (~5.2%), or at least break even--I could just let it sit there until I'm ready to do something with it. Anybody have advice or see any problems with my logic?

  • For 600k, I'd be looking for a smaller quad or duplex, something that would generate immediate income. Mar 20, 2015 at 23:31
  • Great idea, we are actually looking at houses with accessory units for exactly that reason (but probably a basement or garage apartment, quads and duplexes are usually a little less space than we're looking for)--we live in a city that's popular with tourists, and would like a rental unit that we could list on air b&b to generate income and pay down the mtg. faster (and also have space for visiting relatives).
    – Jas Max
    Mar 21, 2015 at 2:53


You must log in to answer this question.

Browse other questions tagged .