|What kind of return are you earning on your cash investment?|
A common question is whether a consumer should prepay his mortgage. My rule of thumb is that if the individual expects to earn more after tax on his investments than he pays after tax in interest on his mortgage, he shouldn't prepay the mortgage. The more conservative the investor, the easier it is to make the argument that he should prepay the mortgage.
You can use the same rule for whether you should take out a mortgage. What kind of return are you earning on your cash investment? Odds are that even in the current low interest rate environment your mortgage rate will be 2% to 3% higher than the yield on your cash investment. I'm assuming your cash is held outside of a tax-advantaged retirement account because you list your retirement balances separately.
Another reason to consider paying cash for the house is how close you are to your planned retirement. You're in your late 50s. I'd guess your planned retirement would be within the next decade. Taking out a 15-year fixed-rate mortgage will have you making monthly mortgage payments into your early 70s.
I used a mortgage payment calculator to calculate a monthly mortgage payment on a 15-year fixed-rate mortgage at 3.5% for a $120,000 loan, assuming you would make at least a 20% down payment on the $150,000 purchase price. That monthly mortgage payment is approximately $858, well over half your monthly income. I'd rather see you pay cash for the house and set money aside to rebuild your savings each month than commit to this monthly payment.