I don’t think your reasoning is flawed. The finance books all agree that you should finance as much as possible, if the rates are reasonable. But personally, I am not comfortable with that. My income is high now, but I am essentially self-employed so I don’t take that for granted. At any given time I can look ahead 5 years and feel confident about my business, but beyond that there is just too much uncertainty. I don’t have a crystal ball to predict the future of my industry, the economy, etc. etc. So I would prefer to keep my monthly expenses low and live well below my means.
Living this way offers peace of mind and flexibility that is hard to put a price on. A few years ago, my spouse was laid off. Since we already lived on one income (and saved the rest), we had options that others in his situation didn’t. He took some time off to spend with the kids and now is doing work that is personally rewarding, but much less lucrative than his old job. We are all happier. We didn’t “need” the money to support our lifestyle. If we had a huge mortgage payment, we would have had to dip into savings every month and I just wouldn’t have felt comfortable doing it. I know that if I had “banked” the downpayment, I could draw on that account. On paper that is the same thing, but it wouldn’t feel that way.
I guess it boils down to what makes you feel the most secure – seeing a larger balance on your monthly financial statements, or having plenty of money left over every month after you pay your bills.
