Should I consider buying a home with cash?

Many people finance their purchase of a home through a mortgage. In your case, this may not be necessary. You have enough money that you could offer a seller a cash payment for the home without any need to secure outside financing.

U.S. News and World Report describes a number of reasons why offering to buy with cash could prove beneficial. Still, even if you have the money to purchase a property, you might find a reason to go ahead with a mortgage anyway.

The benefits of a cash offer

To start with, a seller might find a cash offer more appealing than a buyer who wishes to finance with a mortgage. Since your offer does not depend on a loan, you present less risk to the seller. Not bringing a lender into the sale can also shorten the closing process.

Additionally, paying for the property yourself eliminates a number of costs that stem from a mortgage. You are not paying origination fees and interest costs that go along with your monthly payments. Also, if you ever decide to sell the home yourself, you reap the full profits of the sale since you have not had to pay off a mortgage.

Reasons to still seek a mortgage

Financing your home with a mortgage may still be preferable in spite of the fact that you possess the cash to buy it. For one thing, you may have just enough money to pay for the home, which could put you at financial risk if you need to pay for sudden medical costs or to repair a damaged car. Also, taking out a mortgage frees up your home purchase cash to put into investments like stocks or mutual funds.

The fact that you have enough money for a cash purchase may also entice a mortgage lender to give you favorable terms. You could offer a large enough down payment that the lender would give you lower interest rates. It is also possible that you may receive a federal tax break on your mortgage, though this does not apply to all homebuyers in all circumstances.

Plan according to your priorities

There are different ways a cash payment for your home may be of help, but be sure you have exhausted the alternatives so you know you have made the right decision. Ultimately, the choice of whether to pay for a home with cash should rest on your personal priorities.



FindLaw Network