Buying with cash: pros and cons, by Joe Fisher.

By Joe L. Fisher

Buying with cash pros and cons

Homebuying is not for the faint heart. If you are reading this, you probably know this already.

Also, if you are reading this, it means you are already at a crucial point in this process.

THE FINANCING PHASE

Many new buyers often struggle to answer this question, and let’s face it, the mortgage is payment is not that idealistic.

If you can pay cash, why not?

You’d avoid the hustle of filling in countless mortgage application papers. You’d avoid the headache that comes with chasing after banks and lenders. Heck! You’d even not have to worry about your credit score or your debt to income ratio, and many other things.

BUYING CASH IS A NO-BRAINER!

Well, not necessarily, and this is what we’ll be discussing in this article.

IS BUYING CASH THE RIGHT FINANCIAL MOVE? Let’s find out.

Buying a home with cash isn’t always the right financial decision, even if you have a few hundred thousand dollars just sitting around. It may seem like a good move, but it is not.

But, it has some of its own merits that we cannot ignore. As such, if you are considering buying a home with cash, it is important that you first understand what it means for your bottom line and long-term financial goals.

The first step is determining whether buying cash is more advantageous than buying with a mortgage. In essence, run the numbers before making a decision.

LET’S DO THE MATHS...

The Median Sales Price of Houses Sold for the United States is $374,900, according to Q2 data from the Federal Reserve Bank of St. Louis. The current interest rates are around 2.80-2.90% for the average 30-year fixed mortgage rate and 2.15%-2.20% for the 15-year mortgage.

Well, with cash, it’s simple, you pay $374,900. Using the 15-year fixed mortgage rate and saying you put a 5% down payment leaves you with $356,155 to pay with a 2.2% rate. So the cost of the mortgage after 15 years would be $418,320. Using the 30-year fixed mortgage rate and saying you put a 5% down payment leaves you $356,155 to pay. With a 2.9% rate, the cost of the mortgage will be $533,520 after 30 years.

No doubt that if you can pay for the home without the mortgage, you can save a lot of money. But it doesn’t end there.

SO WHAT ARE THE PROS OF BUYING CASH?

The example above sets the record straight that buying with cash is a lot more advantageous. But even beyond the hundreds of thousands in potential savings, homebuyers can capitalize on a range of other advantages when paying cash. Some of the pros of buying cash include;

YOU WILL HAVE A HIGH NEGOTIATING POWER

You ever heard of a saying that real estate that is cash is king? Well, it’s old, but it remains true. Sellers are looking for the highest buyer in the market; they are also looking for a person who can guarantee them certainty. The idea of accepting offers is just so ‘boring’ to them because it means they’ll have to reject some bids too. It also means that they have to wait for probably a month for the contract to fall through.

WHO WANTS TO WAIT AROUND FOR THAT WHEN THERE’S A CASH BUYER?

Buyers buying in cash reassure the sellers that they will close. So there’s some degree of seriousness attached to the cash buyers, and this is what the sellers want.

Also, getting rid of the lender from the equation means settling the deal faster, and therefore because you’re bringing all this convenience to the buyer, they would be willing to renegotiate the price for you.

NO RENT! NO MORTGAGE HOW NICE CAN THIS BE?

For many people in the US, house payments make up the largest percentage of monthly expenses. So eliminating this payment will dramatically reduce your living expenses.

Assuming the worst-case scenario happens and you lose your job or hit financial hard times, unlike the buyer paying mortgage payments, you will not be foreclosed on.

Therefore, no matter how bad things might turn out to be, you will be at peace.

LOWER CLOSING COSTS

With a mortgage, the lenders will charge you for certain services, which add to the amount you will owe at closing. Of course, I am talking about lender fees, application fees, loan origination fees, and so many others. When you are paying in cash, you won’t have to deal with the lender-related closing costs.

These are the main advantages of buying cash. There are so many others you can look up on the internet. But what about the cons?

DID YOU KNOW THAT WHEN YOU ARE BUYING, YOUR MONEY WILL BE TIED UP IN THE HOUSE?

To put it simply, and by the way, there is nothing wrong with this, but by buying cash, you will be putting a large amount of money on a fairly illiquid asset. This means you cannot tap into that money in case you need it quickly.

What do I mean by that? Assuming you hit financial rock bottom, it would be easier for you to pull some savings from your savings account, but that is far from the truth when it comes to the house, even if you put the house up for sale, at least not as fast.

Before committing your money to buy a house with cash, it might be a good idea to weigh the options available to you where you could put your money to better use. For instance, you may see better value for your cash if you put that money into an investment or maybe boost your retirement savings.

Yes, buying a home almost instantly by purchasing

cash can provide great peace of mind, and we know that peace has an intrinsic value, but overall, it could be financial suicide.

Imagine buying cash with all your savings, and then an emergency happens. Where do you go from there?

YOU ARE STILL SUBJECT TO OTHER EXPENSES

Just because you don’t have a mortgage doesn’t mean that you are exempted from paying the regular housing-related expenses. You are still subject to property taxes, the homeowner’s insurance, homeowners association fees, and many others.

SHOULD YOU BUY CASH?

If you consider buying cash, I suggest that you first consult with your financial advisor or a professional in the mortgage industry like Eric Lawrence Frazier MBA. he will look at your situation and help you figure out how to buy your home with cash could affect your financial situation.

Still, real estate agents are a valuable resource at your disposal. They understand the housing market better. They know when the houses are overpriced or the worth of a home, you should never ignore them. If you are in Richmond, CA, it may be advisable to reach out to Jole L. Fisher, A VIP Agent stationed in Richmond.

ABOUT JOE L. FISHER

DRE#01070856| Richmond • First time Home Buyer Specialist • Realtor since 1988 • Past Board of Directors CCAR • Past President West Contra Costa Association of Realtors • President Coronado Neighborhood Council • Board of Directors Richmond Chamber of Commerce • Board of Directors Richmond Convention Visiting Bureau • Board Chair for Richmond

ABOUT THE POWER IS NOW MEDIA

The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, and is headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com

Sources

https://www.rockethq.com/learn/home-buying/the-pros-and-cons-of-buying-ahome-with-cash https://www.moneycrashers.com/buying-house-with-cash-pros-cons/ https://www.rocketmortgage.com/learn/buying-a-house-with-cash https://www.martyngerrard.co.uk/articles/buying-a-house-with-cash-pros-andcons

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ERIC LAWRENCE FRAZIER MBA (714) 361-2105 eric.frazier@fbol.com www.thepowerisnow.com

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