Save and buy with mortgage or pay toward current and 2nd mortgage

[Kevin Tanzi]

Hi,

I have a current mortgage on my home with 25% equity toward the value of 500K. I plan on buying a retirement home out of state in about 3 years and will rent it for about 7 years until I sell the current home and retire to the new one. I have $2K a month to invest, my question is do I invest the $2K in the market and use it toward a downpayment and take a mortgage for the remainder, or do I apply the 2K toward my current mortgage and take a home equity loan against my current house to purchase the new house with "cash". I'm not sure of the mortgage interest benefits comparing a 2nd mortgage  -vs- a 2nd home. The benefits of paying down the mortgage I see is 1. When I sell the current one and retire, the new house will be paid in full. 2. I will be paying less interest for the next 3 years. 3. I will be building more equity in my current house.  

Thanks in advance.