Hypothetical question

[mungbeanz]

If you had £5,000,000 and wanted to buy a house for £1,000,000 would it be better to pay cash or get a mortgage? I have often wondered this as it seems some lottery winners (like lotto lout Michael Carrol) splash their cash on homes and run out pretty quickly.

[grasscarp]

Why take on a mortgage if you dont need to and pay someone interest to lend you money?

[mungbeanz]

I was thnking that maybe the interest on the mortagage might be less than the interest you could make by having the cash in your account.

[bednobs]

i think it's unlikely - new mortgage rates are reasonably high at the moment compared to savings interest rates. Of course, i know not a lot about millions, so it might be different

[woofgang]

not these days it wouldn't be. there were times when it might have been true and certainly a couple of years ago, we took out a smallish loan to buy something because the shares we would have sold were making much more than the loan interest. It does also simplify your tax position to spend the money rather than invest it. Capital gains tax is horrendous and you don't pay it when selling a house if its your main residence.