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Smart Homebuyers: Four Reasons Not to Purchase Your Home With Cash
Thursday, July 12, 2018
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Thursday, July 12, 2018
“A house can be a lifelong romance, and we should find
ourselves falling in love with our homes over and over again.” –Suzanne Tucker
There is a myriad of reasons why a straight out all-cash deal
might be beneficial, but it is not always recommended.
However, with today’s fast-selling real estate market
conditions, it can be incredibly tempting to go all-in with your
money—particularly if you can find an incredibly good deal. Of course, much
like any homebuyer looking for their dream homes, a seemingly wise move would
be to lock it down immediately and offer to pay straight cash. Indeed, if you
have the means, paying in cash might be an excellent way to fast-track a deal.
Plus, a seller might be more likely to accept your offer. But does having the
means to pay as well as having sufficient liquid assets be reasons enough to
think that purchasing a home without a loan is a good idea? Well, if you are
looking to lock that serendra bgc
property down with a cash payment, you might want to reevaluate your decision
first.
Here are some of the soundest reasons why paying in cash
might not be such a good idea after all:
1(1) You
need to keep some liquidity
Purchasing a home with straight out cash might not be
a good idea if you have just enough liquidity to pay for it. Remember, cash is
essential to have on hand for anything that might come up. Furthermore, cash
would also form part of contingency plans for any emergencies that might
possibly occur. From needing to fund a medical emergency or losing a job to
financing a new roof, you would want more than enough cash to serve as a buffer
for any of these possibilities. Having enough money to pay for other stuff or
other things that might come up is paramount. So, if you have enough cash money
only to pay for your new home, then look for an alternative way to pay.
2(2) You
qualify for a solid mortgage
More often than not, having enough cash means that
lenders would often view you favorably for mortgage options. Although interest
rates are constantly and steadily increasing, they have never been as historically
low as they are now. With cash, you can put down at least twenty percent on the
home with a fixed-rate mortgage. In this way, you get to keep a significant
portion of your liquid assets and pay only a minimal interest rate.
Furthermore, your significant down payment would effectively prevent you from
having to pay private mortgage insurance.
(3) Your
money is better invested elsewhere
So you might have scored big and cashed in right
away, but that does not mean that a home would be the best investment you can
make right now. Even if you are looking for potential homes outside the general
metropolitan area, so long as you have enough cash to pay for a home outright,
chances are you have a sizable amount of money with you. This does not mean
that your choices are limited between paying for real estate property and have
it grow stagnant in the bank. Remember, there are other forms of investment as
well. Mutual funds, personal businesses and stock markets are all excellent
forms of investment. Do note however that there is no get rich quick scheme in
investing. So, do your research on the numbers first before putting your money
anywhere.
2 (4) There
is no guarantee that home prices will increase
While many online articles
would laud and even advocate real estate investments, the truth is, no one can
really guarantee that home prices will increase. Yes, no doubt that real estate
is one of the best investments you will probably ever make in your life, but much
like any investment you would make, there is a risk involved. Putting all of
your money in one investment is akin to going all-in on a gamble and is indeed,
a dangerous game to play with your finances. Try to diversify your investments
and do not stick to real estate alone. So that in the event that the real
estate market would crash, you still have other investments to keep you
afloat.
