Should You Buy a House with All Cash?
With the home inventory being very low for those wanting to purchase a home, buyers are looking for any way they can to win out in a home purchase during a highly competitive market. Those that have the ability to make an all-cash offer on a home can skip the long waits through the loan approval process, but sometimes, even though it may put you ahead of the other buyers wanting the home, a cash offer is not the best choice. Here is why:
You Need to Reserve Cash for Emergency Funds
If you have the ability to pay for a home with cash, but it is going to deplete every last penny from your savings account, this is not a good idea. If there is anything we learned during the pandemic, it’s the importance of having a financial safety net in the form of a savings account when emergency situations arrive. So if this cash offer is going to leave you without anything in your account, don’t do it.
You Qualify for Great Mortgage Terms
One of the reasons for the housing shortage is the larger number of buyers looking for a home. One of the reasons those buyers are shopping for homes is due to the historically low-interest rates making homes much more affordable than they have been in the last few years. If you have a large sum of cash in savings you are seen as much less of a risk by lenders. You will be able to qualify for a conventional loan with far fewer requirements like an appraisal and obtain financing much more quickly than other buyers. Especially if you use some of that cash in a sizeable down payment.
Your Money Might Make More Money for You When Invested in Other Places
Homeownership is a good investment of money. The land the home sits on is only going to accrue more value. But there many other forms of investment in which you can increase your net worth faster. Real estate is more of a marathon to increasing net worth than a sprint. Investing in stocks, mutual funds, or someone’s new business venture just might bring you more return on your investment at a faster pace. Just remember no investment is a sure thing, there is a risk of losing money involved, even with real estate.
The Tax Breaks
Mortgage paying homeowners get a tax break on the interest they pay on their home loan. The tax deduction is limited to $10,000 as of 2017, while this only affects those who own homes with very high property taxes it does not affect a high number of homeowners. It is a significant amount of reduction if you qualify.
There is No Guarantee of Appreciation
Home prices are on the rise with current buyer demand, but they are expected to cool off a little in the near future and have already begun to do so in some metro areas. There is no such thing as a guarantee that your home is always going to be worth more money than when you bought it. Looking back at the great recession of 2008 clearly paints that picture for us. So why not hold on to some of that money should something like that happen again.
For more information on buying a home in Columbus and surrounding areas please contact us anytime. We. Would love to help you find just the right home for your needs.