Link: http://www.investopedia.com/articles/personal-finance/111214/buying-home-cash-vs-mortgage.asp
This article talks about when to consider purchasing a home with cash versus getting finance such as a mortgage.
Paying for cash is a big plus. It eliminates the need to pay interest on a loan and helps with many closing costs. There are no mortgage origination fees, appraisal fees or other fees charged by lenders to assess buyers. It can make the purchase of the house look better to the sellers. Peter Grabel, managing director of MLO Luxury Mortgage Corp in Stamford, Conn., says "In a competitive market, a seller is likely to take a cash offer over other offers because they don't have to worry about a buyer backing out due to financing being denied." A cash home purchase also can close faster if desired, than one with financing, which could also be a plus to the seller.
Even though there are many advantages about buying a home with cash, there are also some good things that come with mortgages. "Even if the buyer has the ability to pay cash for a home, it might make sense to not tie up a lot of cash to purchase real estate." says Grabel. "Cash buyers need to be sure to leave themselves plenty of liquidity." If you used cash to buy the house and need some major repairs down the road, it might be hard to get a home equity mortgage in the future because you will not know what your credit score will look like in the future. Also, selling a house bought with cash could cause problems if the owners worked a lot financially to buy it because they might not have enough cash reserved to put down a deposit on a new home.
Bottom line is that when considering using cash or mortgages, think of what option makes the most sense and what will provide the greater return on your investment.
I thought that this article was very interesting because they gave the pros and cons of each method of buying a house. I would be interested to see if the percent of people that buy their house with cash has increased or decreased in the last 20 years.
ReplyDeleteThis is really interesting to hear because I would assume that most people would buy a house through financing. However, it is interesting to hear that there are some people who could pay a house through cash. Which is also interesting to see the pros and cons for both options.
ReplyDeleteI would be right there with Zach and Rosa in thinking not many people actually buy houses with cash. However, after looking it up apparently 43% percent of houses bought in 2014 were bought with cash. Which to me seems very high. I mean it makes sense if one can allot the money to pay with cash up front, but I figured that was a luxury only for the extremely wealthy. It also makes me question if people are downsizing and consequentially have the money to pay for houses with cash? Yet my inclination is for every one person downsizing there is someone financing for the house of the downsizer.
ReplyDeleteVery interesting article. My sister is going through the same issue with her recent house purchase. Its interesting how the new incumbents in office next year will see how the mortgage bond process is very corrupt.
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