Logan Martin Lake Topics: Several Other Alternatives

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	Name:	Maverick -
	Subject:	Several Other Alternatives
	Date:	1/25/2006 6:23:08 PM

Actually if you would like-- take a home equity loan out on you existing residence for up to $100k, buy the lot and write off interest.

Assuming the rate of interest on the home equity loan is 8% and your effective tax rate is say 25% (between federal and state) then your true interest rate would be around (8% x 75%) 6%.

So if you believe the lot is going to appreciate more than 6% per year than you come out ahead, otherwise you do not.

Other thing to worry about is cost of money today versus 2 or 3 years from now, you never know. I would have to assume cost of money would be higher in three years than today. So if you could -- purchase the home today, write off the interest and probably get a better home mortgage interest rate than 3 years from now. So long term you may also come out better by going ahead and purchasing the home today at current mortgage rates. Even if you have to go 30 years, then once you sell your primary residence you could double up on the monthly payments and have your new home paid off in like 12 year or so.

Know this can be confusing, but bottom line is which alternative gives you better cash flow over the long term.

Buy Lot now and build later - possibly pay higher mortgage rates later
Buy house now at current mortgage rates -- could take out a home equity loan to pay the monthly payments until you move and sell your primary residence in 2 years.