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We're in process of buying a new primary residence and have the option of paying cash (sold previous residence) ... or a pre-approved 4%-range mortgage.
I've about decided to go ahead and pay cash, due to the low rate of return on investment options. If we need the cash-flow, we can always get a line-of-credit in the 3-5% range. Otherwise, paying cash won't really cramp our (retired) lifestyle.
Are there reasons we might not want to pay cash (assuming we can afford to do so)?
No.
Unless there is some weird circumstance you have not mentioned that would require you to line some bank's pockets with tens of thousands of dollars of interest.
We're in process of buying a new primary residence and have the option of paying cash (sold previous residence) ... or a pre-approved 4%-range mortgage.
I've about decided to go ahead and pay cash, due to the low rate of return on investment options. If we need the cash-flow, we can always get a line-of-credit in the 3-5% range. Otherwise, paying cash won't really cramp our (retired) lifestyle.
Are there reasons we might not want to pay cash (assuming we can afford to do so)?
You mention you are retired. Not to make an assumption, but if you are normal retirement age (65), the possiblility exists that either you or your spouse will need (or want) to move into a retirement or care facility in the next 10-15 years. If you have large cash reserves to make the move without selling the home, then pay cash. If not, you many want to finance all or part of the home so you could move without selling. Last thing you want is to to be in the position of needing to move into a care facility and having to sell before you can do so.
We're in process of buying a new primary residence and have the option of paying cash (sold previous residence) ... or a pre-approved 4%-range mortgage.
I've about decided to go ahead and pay cash, due to the low rate of return on investment options. If we need the cash-flow, we can always get a line-of-credit in the 3-5% range. Otherwise, paying cash won't really cramp our (retired) lifestyle.
Are there reasons we might not want to pay cash (assuming we can afford to do so)?
One major flaw in your thinking, you said "we can always get a line-of-credit.." That may not be true. Lenders could stop offering HELOC's, they could tighten guidelines, etc....
Nothing wrong with paying cash, but i would rather sit on more cash then home equity. Home equity cannot buy groceries, or pay the light bill. People tend to need their equity in times of trouble and during times of trouble lenders are less likely to allow you to access it.
Your closing costs would be significantly less without the lender origination fees and all that fun stuff. If you really wanted to go with a lender, being of retirement age you could look into a reverse mortgage.
If younger truly 100% retired and have not just a big pile of green BUT ALSO a well structured mix of pension / IRA / 401k income I would tend to say go ahead and use the cash
HOWEVER if paying cash wipes out most / all of your cash reserves OR you have limited ability to have flexible INCOME I say DON'T PUT TOO MANY EGGS IN ONE BASKET -- houses can, do, and may coninute to sink faster than even a crummy CD still floats..
Depending on your INCOME lenders may not be as easy with tuning your equity into spendable dough if the future needs shift.
If younger truly 100% retired and have not just a big pile of green BUT ALSO a well structured mix of pension / IRA / 401k income I would tend to say go ahead and use the cash
HOWEVER if paying cash wipes out most / all of your cash reserves OR you have limited ability to have flexible INCOME I say DON'T PUT TOO MANY EGGS IN ONE BASKET -- houses can, do, and may coninute to sink faster than even a crummy CD still floats..
Depending on your INCOME lenders may not be as easy with tuning your equity into spendable dough if the future needs shift.
100% agree !!! I'll add our personal experience We paid off our house shortly before I retired, and I gotta tell you - it feels pretty good. I did put a HELOC in place before that, which we've never used, but it's there just in case.
100% agree !!! I'll add our personal experience We paid off our house shortly before I retired, and I gotta tell you - it feels pretty good. I did put a HELOC in place before that, which we've never used, but it's there just in case.
many lenders have closed out unused and used HELOCs. I would recommend you check to make sure the HELOC is still available. HELOC's are like credit cards..credit card companies can cut your line of credit or turn off the credit at any time for any reason they want to, the same thing your lender can do with your HELOC.
Pay cash. It gives you are great deal of leverage in the buying process versus other bidders who might be willing to pay a bit more, but whose 'leverage' is diminished by their need to secure financing. The old 'bird in the hand' thing goes a long way with sellers in this market....
There is pleny of credit out there to folks who are qualified. You'll be fine in that regard.
I doubt the previous poster has much experience in actually doing real estate deals under the present circumstances.
Well qualified buyers that have a pre-approval get just as good a deal as any buyers that does not need financing.
No well advised seller should ever entertain an offer that nets them less just because of financing fears.
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