IT IS LOGICAL to believe that buying a home with cash is the smartest choice for your “ financial health .” You might want to reconsider this idea ! When might it be advantageous to finance a home rather than pay for the home upfront with cash ? There are definite benefits to both options !
CASH
Paying cash for a home eliminates the need to pay interest and closing costs associated with a loan . Sellers often prefer a cash offer ; they may even lower the price of a home . In a competitive market , a seller is likely to accept a cash offer over other offers because there is no financing contingency involved . It usually takes 30 days minimum to close on a mortgage ; cash transactions usually close quickly , which could be attractive to a seller . Additionally , a cash buyer ’ s home is not leveraged , which allows a homeowner to sell the house more easily .
MORTGAGE
choice to obtain a loan . Depending on the state of the stock market , saving on mortgage interest by paying cash may not be financially prudent . It can often make sense to invest the cash you would have paid for a home in stocks , as the rate of return will often be higher than the interest paid on a mortgage .
THE BOTTOM LINE
The best advice when considering whether cash or a mortgage makes the most sense is to opt for the choice that gives you the most flexibility and peace of mind . Which option will provide a greater return on your investment ? Paying cash for a house is like investing in a bond that pays the same interest rate you ’ d pay with a mortgage . Another option is to use cash for a quick closing and then do a mortgage after to get the property you desire . If you decide to pay with cash , make sure you will still have enough to cover ongoing costs such as property taxes , homeowner ’ s insurance , HOA fees , and other fees each month .
Conversely , obtaining financing also has significant benefits . Even if a buyer could pay cash for a home , it might make sense to leave assets “ liquid ” and , instead , finance the home giving the buyer flexibility if other needs arise down the road .
SELLING A HOME BOUGHT WITH CASH COULD BECOME PROBLEMATIC , IF THE OWNERS DO NOT HAVE ENOUGH CASH RESERVES AFTER THE PURCHASE . IF CASH BUYERS DECIDE IT ’ S TIME TO SELL , THEY WILL NEED BE CERTAIN THERE ARE SUFFICIENT CASH RESERVES IN ORDER TO MAKE A DEPOSIT ON A NEW HOME .
Cash buyers need to be sure to leave themselves plenty of liquidity . By opting to obtain a mortgage , you will have greater flexibility . Paying cash also has tax implications . In most cases , mortgage interest payments are tax deductible .
Of course , with a mortgage , you will ultimately pay more for the property , since interest payments add up over time . Current interest rates alone are often a motivating factor in someone ’ s
John Milz
Mortgage Originator MLO NMLS : 1061197
Bonita Springs Branch
NMLS : 3446 3301 Bonita Beach Road , Suite 112 Bonita Springs , FL 34134
Products Offered :
• Conventional
• Jumbo
• FHA
• VA
• USDA Rural Development
• Reverse Mortgage
Many more niche products to suit your unique financing needs
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Office : 239.676.3246 ext . 40078 Cell : 239.248.0163 Fax : 866.927.6275 jmilz @ GoldStarFinancial . com
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