Pay Cash for a house, or put a percentage down and invest remainder ???

I would like to get feedback with regards to paying cash for a home in todays market. Specifically Dallas or Austin, TX. Does it makes sense to pay cash for a home today and take the balance and invest that. I have heard numerous schools of thought: interest rates are low/you'll need the deductible interest your home provides/you can't borrow money this cheap/if you have your house paid for you, you are set for life. I am confused at this point and tend to be leaning toward putting 50% or more down and financing at 10 years fixed. I tend to subscribe to the Debt is Dumb school of thought.

I can't answer specifically about the Texas real estate market, but I can speak about loans in general. Debt is not intrinsically bad, but it is very easy to misuse.

The short answer: if you are not going to invest the money you would have on hand if you took a loan, just pay cash. If you are savvy enough to calculate the cost of the loan, and weigh that cost against other investments, you might want to take the loan. (To the point of the above answers, you have to be very honest with yourself about your investment savvy... if you really know what you're doing and are highly confident about your return, that's one thing, but if your investment strategy involves undiversified risk, don't do it.)

Long answer below...

When you buy a home, it is really an investment. Ideally, the price of the home will go up, so you can eventually sell it (or at least count it among your total net worth). So think of it as part of your investment portfolio.

There are then two things to consider: (1) do you want to diversify your portfolio so all of your money isn't sunk in the house, and you can spread it amongst other investments? (2) Will your non-house investments outperform your house, with the added handicap of the interest rate you're paying on the mortgage?

The actual calculations depend on the interest rate you're getting. Be especially careful if you are getting a variable rate mortgage, as interest rate increases could chnage your calculations. If you are getting a fixed, this is less dangerous, and you can even calculate the total cost of the loan quite simply.

Edit: good point by the person below, they're correct in that tax considerations may be the biggest thing here. I'd vote for them.

You can pay cash for an entire house? Impressive. Debt isn't great, but a house payment is understandable. But if you put down a significant downpayment your monthly payment can be kept reasonably low. In addition, if you are able (and sounds like you clearly are) you can pay more each month on the principle and pay off the house early. I took out a 30 year and payed it off completely in 8 years just by paying more each month. Definitely talk to a financial advisor. They will guide you to do the right thing.

I graduated from that school too. Debt IS Dumb.
I have heard different ideas on that. My brother in law took the equity on his home and invested it because he would make money fast and then he could pay off the house later. Dumb. But, hey, that's just me.

Paying any interest is dumb in my book. But obviously we are usually forced to do it for big purchases that we don't have the money for and a house qualifies.

So, I would pay as much as possible and put the remainder of the mortgage on as short a time frame as feasible.

Check out the calculator, it's my favorite.
By the way mort=death, gage=grip.
Translation, mortgage is a death grip.
Get rid of it as soon as possible.
Good Luck !

http://www.ewmortgage.com/mortgage/

If you have a high marginal tax rate, debt is probably the way to go to the extent you can deduct mtge payments from your tax return. Think of it as a cash management exercise.

I disagree with other answers as to the return of alternative investments being a major decision factor - you dont need cash to get investment exposure to those (think: futures or margined accounts).