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The Pros and Cons of Paying Cash When You Buy Your Next Home

September 10, 2015 by support

The Pros and Cons of Paying Cash When You Buy Your Next HomeWith mortgage bubbles and real estate issues still in recent memory, one might feel that their best option is to buy their next home using cash instead of borrowing the necessary funds. In today’s article we’ll explore the pros and cons of paying cash for that next house or condo.

The Pros Include A Feeling of Complete Ownership

There’s a feeling of pride and joy that comes with owning a home outright. There are several other reasons for paying cash instead of signing on the dotted line and getting and being strapped to a 30-year mortgage. Perhaps the best reason is having 100 percent equity in the home.

The cash will be there to borrow in case of an emergency. Having cash on hand is great if a water pipe bursts or there’s a huge car repair bill. In addition, instead of paying a monthly mortgage, that money could be used to start a college fund, to grow savings or to invest.

And, credit problems wouldn’t be an issue since there wouldn’t be a need to check credit history in the first place. The homeowner may be able to negotiate a better price, which may result in a likelihood of a smoother sale, and attract more prospective buyers.

The Not So Great Reasons To Pay With Cash

Buying a home is one of the largest financial investments a person will make in his or her lifetime.

However, buying a home outright most likely means that a significant percentage of cash will be tied up in the house. Less cash will be on hand for savings, college funds, and emergencies like a plumbing malfunction or an expensive car repair.

While paying in cash may result in a mortgage life, if the property value drops for whatever reason, there’s no purchase protection. For instance, if the market value of a $100,000 home loses 10 percent that will be a loss of $10,000. Take this example and apply it to a mortgage down payment. If the market value falls, there’ll be a loss of $10,000, but the bank would take a loss for the remainder of the property value.

Also, when paying with cash, there is no third party property evaluation to ensure the buyer isn’t overpaying for the home. Banks will send a professional to provide a property evaluation check to verify the correct home value.

Buying a home is a significant personal decision. In today’s tough economy, homeowners are finding ways of cutting back on expenses. Owning a home outright, without the stress of mortgage payments can be extremely liberating. Comminting a large amount of your cash to this large of an investment needs careful planning.  Sit down with your trusted mortgage professional today before making the decision to use cash to pay for a home.

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Filed Under: Home Buyer Tips Tagged With: Buying A Home, Home Buyer Tips, Homeowner Tips

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This licensee is performing acts for which a real estate license is required. C2 Financial Corporation is licensed by the California Bureau of Real Estate, Broker #01821025; NMLS #135622. Loan approval is not guaranteed and is subject to lender review of information.

Loan is only approved when lender has issued approval in writing. Specified rates may not be available for all borrowers. Rate subject to change with market conditions. C2 Financial Corporation is an Equal Opportunity Mortgage Broker/Lender.

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The services referred to herein are not available to persons located outside the state of California.
C2 Financial Corporation is approved to originate VA and FHA loans, and has the ability to broker such loans to VA and FHA approved lenders. C2 Financial Corporation is not acting on behalf of or at the direction of HUD/FHA or the VA.

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