Reply to Afford $1.8M on 300K?

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[quote=Anonymous]
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OP here - you are right - $9K would eliminate our positive savings cash flow. Certainly we could reduce it to $8K and have $1K monthly positive savings cash flow.

We have enough savings and equity in our current house to put 20% down on a new house (so $300-$400K).  And accumulate about $90K in cash savings each year. I don't know why we would put more than 20% - though - PMI is done for, and I don't see why getting a smaller mortgage just for the sake of having a small mortgage is better (besides the positive cash flow issue).

Waiting as year to reduce the principal by $90K doesn't make sense to me if I am able to borrow at <5% (and possibly refinance if the rate drops below 3%).  Suppose I had $2M in cash.  I  don't think I would buy the house in all cash (and have a $0 PITI).  I think the right (income maximizing) thing to do is put pay exactly $400K down on a house (to eliminate PMI) and do something else with the remaining $1.6M that garners returns greater than my expected borrowing rate.  or am I being financially illiterate here?

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You are not being financially illiterate if you can earn a return greater than your borrowing rate. But some people (including myself) would prefer the security of having a house paid off vs. maximizing financial returns. Also
I’m confused why you have only been dumping your savings in 1% accounts. Why have you not been investing some of that in non-retirement stocks? [/quote]

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