A lot of people go the cash route. After all, you worked hard for that $500,000, why give extra money to the bank if you don't have to? Plus, there's a lot of peace of mind and pride knowing that this significant asset is paid for. No monthly mortgage payment to be tied down to, all that equity to leverage.
But think about this: once you hand over that $500,000 it's gone. Yes, you have a house free and clear, but you don't have as many options as you did when you had the cash. And the old adage holds true: you can't take it with you.
These days, with interest rates at 50-year lows, taking a mortgage actually makes a lot of sense. With interest rates at or even below 5% and deductible interest, it's really only costing you somewhere around 3.75% . You might even be able to reinvest the unspent cash for a net growth.
First of all, when you take a mortgage and hang on to your money you now essentially have both a house AND money to enjoy. Ask yourself: Why did you work so hard for that money in the first place? To USE it. SHARE it. LIVE with it, ENJOY it. Also, when and if you decide to sell or refinance the house you always have the ability to shop around and negotiatiate for the best deals.
Now, I am not advocating reckless squandering of your savings. And if you lack the discipline and/or guidance to manage that wealth (think college-age heir), it might make a lot of sense for you to put every penny right into the house. However, if you have the wisdom to prudently handle your funds, you might like to keep at least some of that money available.
Consider the things you could do: travel with your spouse, friends or family; help a grandchild with college; reinvest; contribute to a favorite cause. You could even pay off that mortgage!
Ultimately, the decision how to manage your money is very personal. But before you surrender all of your savings into one place, think of what you want from your money and all of the different ways you can go about achieving that.
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