{"id":2628,"date":"2025-09-02T23:53:19","date_gmt":"2025-09-02T23:53:19","guid":{"rendered":"https:\/\/ft365.org\/index.php\/2025\/09\/02\/dont-shortchange-investments-to-buy-a-house-bankrate\/"},"modified":"2025-09-02T23:53:19","modified_gmt":"2025-09-02T23:53:19","slug":"dont-shortchange-investments-to-buy-a-house-bankrate","status":"publish","type":"post","link":"http:\/\/ft365.org\/index.php\/2025\/09\/02\/dont-shortchange-investments-to-buy-a-house-bankrate\/","title":{"rendered":"Don’t Shortchange Investments To Buy A House | Bankrate"},"content":{"rendered":"
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The stock market \u2014 and home prices \u2014 keep setting records, and mortgage rates<\/u> remain north of 6.5 percent. It\u2019s a combination that has many Americans cashing in stock holdings to buy homes.<\/p>\n

In fact, the National Association of Realtors (NAR) reports that 31 percent of homebuyers in July paid cash. That number rarely eclipses 30 percent, according to NAR Chief Economist Lawrence Yun.<\/p>\n

But even if you\u2019re lucky enough to have investments you could cash out to buy a home, experts typically recommend leaving them in place and taking out a mortgage. Here\u2019s why.<\/p>\n

Look for the highest return<\/h2>\n

Paying cash for a home wasn\u2019t so attractive when mortgage rates were at 3 percent. Most homebuyers understood the value of locking in low-rate money for a long time. However, when mortgage rates passed 7 percent, the calculus changed for some. After all, if you skip the 7-percent mortgage, you\u2019re essentially getting a 7-percent return.<\/p>\n

However, stocks return about 10 percent on average, which complicates the calculation.<\/p>\n

Companies rarely opt to own real estate free and clear, says Thomas Anderson, author of \u201cThe Value of Debt\u201d and founder of FreeFinancialPlan.com. They borrow against their properties and use the money to operate their businesses. But individual homeowners often take a more risk-averse approach.<\/p>\n

\u201cA house will appreciate or depreciate the same, regardless if you have a mortgage or not,\u201d Anderson says. \u201cCorporate finance knows to separate this. Personal finance does not.\u201d<\/p>\n

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\"couple<\/p>\n

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Shop smarter for mortgage rates <\/h3>\n

Bankrate connects you to the latest lender offers, tailored to you. Find your low rate today.<\/p>\n

Explore mortgage rates <\/p>\n<\/div><\/div>\n

Staying invested makes long-term sense<\/h2>\n

In his book \u201cThe Value of Debt in Building Wealth,\u201d Anderson spells out the math behind holding onto stocks while paying a mortgage. According to his calculations, a couple who paid only the interest on their mortgage and poured money into retirement savings would have the largest retirement nest egg at 65, even after paying off their mortgage balance. They\u2019d come out ahead of couples who prioritized paying off the mortgage and later saved for retirement or those who prioritized both equally.<\/p>\n

Most families choose to pay the principal on their mortgage, but generally speaking, deprioritizing investments rarely pays off. Anderson points out that even in 1980, when mortgage rates were 15 percent or higher, and stocks fell 24 percent, remaining invested was the smart move \u2014 because a few years later, mortgage rates fell and stocks surged. Someone who\u2019d pulled out of the market missed out on massive gains in equities.<\/p>\n

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There are a world of investment choices, and home equity is an illiquid asset.<\/p>\n

\u2014 Thomas Anderson<\/cite> Author of “The Value of Debt”<\/span> <\/p><\/blockquote>\n

Another factor is that you can\u2019t easily withdraw home equity. \u201cThere are a world of investment choices, and home equity is an illiquid asset,\u201d Anderson says.<\/p>\n

Weighing your risk tolerance<\/h2>\n

It\u2019s typically a good move to invest as much as possible \u2014 but for most homeowners, the choice between paying off a mortgage and investing, including for retirement, is more of a balance.<\/p>\n

So how should you strike that balance? It\u2019s a question of risk tolerance. Are you comfortable with the idea that stocks could decline, perhaps sharply? Or do you prefer the stability of knowing that you own your home free and clear?<\/p>\n

Ken H. Johnson, a housing economist and professor of finance at the University of Mississippi, says you should weigh these two statements:<\/p>\n