The chance to buy a new home with cash is something that many homeowners would consider a dream come true. Such an opportunity can arise from a large sum of money acquired through prize winnings or inheritance, or it may be money you managed to save up over the years with the intent of purchasing the property of your dream. It may just as well be cash gained from building equity with another home. Whatever the source, you have enough to buy a new house with cash. The only issue that may ring at the back of your mind is whether or not such an upfront cash payment for the acquisition of property is a wise move.
How To Know If Buying A Home With Cash The Best Decision
You need to consider various things when you are thinking of investing a significant sum of money in purchasing a new home. While such a cash purchase has its financial advantages, you cannot overlook some of the factors worth lengthy considerations.
You will shoulder the burden of making your tax payments, and that means you must set some money aside for this so avoid late or missed payments. That would not be the case if you bought the house on a mortgage where your mortgage company pays your taxes when they become due for an escrow account that the company set up for you.
If you itemize their deductions, then any interest associated with buying a home with cash is tax deductible. So, this is somewhat inevitable even though you can manage to save a lot of money on interest from the cash purchase. In short, the decision to purchase a new house with cash can have a significant tax implication hence the need to consult with a real estate investment financial advisor so that you make an informed decision.
The Unmistakable Advantages Of Buying A Home With Cash
With the cash purchase option, and though you have to consider some vital factors, you will enjoy some notable perks that include:
1. No mortgage payments
Upfront purchase of your home means that you will avoid the pain of organizing your monthly income so that you ensure that you honor your mortgage payments. As such, you will have more spendable income and well as enough to put aside for a rainy day. Overall, the cash purchase will see you enjoy more financial freedom inside your home even if you are working with limited wages.
2. Save money on interest
The low-interest rates on saving money compared to the high interest paid on loans such as mortgages need you to have an expert outlook when you are thinking of buying a new home. With the mortgage option, you may enjoy the benefits of an extended repayment period, but what that totals to in the long run is a crazy sum on repaying the mortgage loan plus interest that is double or even triple the asking price of the property. In short, you will save big with the cash purchase.
3. Sellers love upfront payments
Every home seller is more than happy to land a buyer that will make payments for the acquisition of the house in cash. For the buyer, this gives them an edge over other interested parties who are making payments in different forms. Also, with the cash option, you also have a better chance of negotiating the price since the sellers favor the cash payments because it eliminates the issues of often associated with loan funding. Moreover, the cash purchase for a home is devoid of a lot of contingencies. Find a seller that is eager to close the deal within the shortest time possible, and things are bound to work in your favor if you are making a cash purchase.
4. Save money on closing costs
With cash, you will avoid the expenses associated with mortgage purchases of a home. You will avoid the closing hustles such as the property appraisal costs, loan origination fees, and other costs linked to dealing with the mortgage lenders. Therefore, you are bound to save thousands of dollars if you buy the new home with cash.
5. Fast purchase and transaction process
Buying a home with a mortgage plan will require that you endure with nearly a month of shuffling paperwork before you can close the deal and claim full ownership of the property. With the cash purchase, the process can be completed in under a week, and you can redirect your financial agendas to other things.
6. Better Chances of getting home equity loans
Your financial institution governs the much you can borrow when applying for a home equity loan line of credit; this is often based on how much equity you have built up in your property. With that fact in mind, buying the home with cash grants you the opportunity to borrow a line of credit that is up to 80% of the value of the property. As such, you have a better chance of getting money for your home improvement emergencies if you opt for the cash purchase of the new house; that is not the case if you bought the property with a mortgage plan.
7. Less impacted by fluctuations in the real estate market
The real estate market is never consistent; it has notable high and low. Such volatility can leave many homeowners with mortgage payments disgruntled by the uncertainties. They are often left owing more for their property than its valid market value. With the cash purchase option, you will not feel the bite of such fluctuation in the housing market because their effects reverse themselves after a few years. In short, you are in a better position to weather the storm of instabilities in the real estate market when you buy a new home with cash.
8. More ways to save money
When it comes to certain things such as homeowner's insurance and other covers such as fire, flood, and earthquake insurance, such requirements are optional for people who bought their homes with cash. However, those that bought their properties with a mortgage are expected to carry such insurance covers. Nevertheless, taking such measures to protect your investment is wise given that you spent a significant sum to own the home.
If you have the money to make an upfront purchase of a new home, then taking such a route will present you with numerous advantages. However, it is prudent to consult with real estate investment financial advisors so that you make a more informed decision.