To use all cash or get a mortgage? Wwyd?

[Housequest]

We want to build a new house on our site, we have pretty much enough cash to build. But now I’m wondering do we use all of the cash and stay mortgage free or do we take on a mortgage and invest the cash? Anyone have any experience with this or insight into which is best? Thank you.

Mortgage free all day long.

I'd do the mortgage personally, as I find it reassuring to have money available if I need it for something else. Would probably try and fix it for five years or so though.

Personally, (and with no financial training) I would get a mortgage so that you have a money pot to fall back on. I think you generally have to build to a certain point in order to get a mortgage anyway?

I'm currently buying with a mortgage although I have the cash.

My reasoning is that I can fix a mortgage at a lower rate than I am likely to get from investments, plus with inflation being high the value of the debt will get eroded.

But most importantly, the cash in the bank gives me the flexibility to use it for other things if I need to, like helping the dc when they go to university/put down a deposit on a house or whatever, which I couldn't do as easily if all my cash was tied up in the house.

There must be a happy medium? Small mortgage over a short term so youkeep cash free for unexpected events. Pay it off after 5 years if you are still able.

Should probably expand on that. For me, having a roof over over my head bought and paid for that can’t be taken from me is worth sooooo much. Especially in these uncertain financial times.

Then I would save the money that would have been spent on a mortgage so would build up a pot that way.

Agree with @Spanglybangles especially if buying a completed home.

But I think op in your position, aren’t builds likely to exceed expected costs, especially with higher inflations and long time length of a build? So may be you might need a mix of both.

The money includes a contingency fund yes.
i suppose if It went WAY over we could get a small mortgage. I do like the idea of staying mortgage free as we could save up to 2k a month and if we lost jobs then there’s only household bills to worry about.

BUT I do know that investment s can be beneficial (we have some investments but not lots!)

in terms of dc uni Costs that is already covered but they are both under 10 and we have no intention of having any more.

both situations are beneficial I know and it is such a first world problem I understand that.

Go mortgage-free, as long as you have a reserve for rainy days.

Compound interest makes any interest rate expensive over time. If you can afford cash and avoid the mortgage, do it and put the monthly cost that would have been the mortgage into investments instead.

Absolutely get a mortgage. You can invest your cash. It will very likely grow much more than the interest you will incur. If anything this approach will allow you to both be mortgage free and have more savings in the near future.

Maybe I should approach a financial advisor? Argh it’s such a hard decision, I don’t want to tie myself into a mortgage but I want the money to work at its best.

An IFA is a very good idea. You can have an in-depth discussion about your exact needs , now and in the future, how risk averse you are etc.

Surely using the cash to build a house is an investment in itself?
you need to calculate how much over the term of a mortgage it would actually cost v how much interest the cash would make if invested.

@Grannyoftheyear yes I suppose. I’m so torn as both have their pro’s. I suppose I need to look at the nitty gritty to really see which is MORE beneficial.

How about an offset mortgage where your savings and mortgage are linked?