Buying a new home with cash? (mortgage, credit, loan)

[babyv7]

I'm in a position where I could purchase a home for around $150k with cash & still have plenty of cash on reserve for emergencies, living expenses, etc. until I find a job. Some experts say that to pay with cash doesn't make sense because you'll lose out on the loan interest tax deduction. But, I've heard others say that if you can afford it, do it. I'd like to get some more feedback.
Also, when purchasing a new home from a builder, do they offer any incentives for a cash-only sale? I know they offer incentives when you use one of their approved lenders, but what happens if you're paying cash?

[VickiR]

When the builders offer you money for closing costs, using their preferred lender, its typically the lender who is giving the builder some credit for sending over so many buyers. So, builders don't really care if you pay cash or not.

I'd suggest that if you have that much cash, you should have a financial planner or at least a CPA to help you figure out if its worth paying cash for your home or if you should use that tax deduction to its fullest.

Vicki

[lovesMountains]

Originally Posted by babyv7

I'm in a position where I could purchase a home for around $150k with cash & still have plenty of cash on reserve for emergencies, living expenses, etc. until I find a job. Some experts say that to pay with cash doesn't make sense because you'll lose out on the loan interest tax deduction. But, I've heard others say that if you can afford it, do it. I'd like to get some more feedback.
Also, when purchasing a new home from a builder, do they offer any incentives for a cash-only sale? I know they offer incentives when you use one of their approved lenders, but what happens if you're paying cash?

Please see a financial planner to help you understand how best to invest this money. It could be that you will want to only pay 50% down on a house to have a low mortgage payment but still get the tax benefit. Then the other 50% could be invested to grow your money. Paying cash for a house means nothing to a builder, in fact, they'd rather you use their credit lenders because they make more money that way. Good luck!

[liveInNC]

Originally Posted by babyv7

I'm in a position where I could purchase a home for around $150k with cash & still have plenty of cash on reserve for emergencies, living expenses, etc. until I find a job. Some experts say that to pay with cash doesn't make sense because you'll lose out on the loan interest tax deduction. But, I've heard others say that if you can afford it, do it. I'd like to get some more feedback.
Also, when purchasing a new home from a builder, do they offer any incentives for a cash-only sale? I know they offer incentives when you use one of their approved lenders, but what happens if you're paying cash?

I paid cash for my house after discussing it with my accountant/tax guy. He told me that you can deduct the interest you pay from your taxes, but not paying that interest in the first place it would come out about equal.

Of course, my situation may be different than yours, so ask an accountant before you make a decision.

P.S. Living mortgage-free is a really nice feeling.

[Miker2069]

Originally Posted by liveInNC

I paid cash for my house after discussing it with my accountant/tax guy. He told me that you can deduct the interest you pay from your taxes, but not paying that interest in the first place it would come out about equal.

Of course, my situation may be different than yours, so ask an accountant before you make a decision.

P.S. Living mortgage-free is a really nice feeling.

I agree with liveinNC. Having a "paid for" home far outweighs having a mortgage and sending a bank interest payments in order to get a tax deduction. The numbers really aren't that compelling. However, you would join that small club of "true homeowners"- people who own their home outright. No bank, no leins, no nothin! I heard your grass "feels" different under your toes when you burn the mortgage. The rest of us- well the bank is kind enough to let us live in the house as long as we make the mortgage payments on time .

Another way to look at it, is if you had that paid for house, would you go get a mortgage and borrow the money against it for whatever investment.

[CAKD]

I think it really depends on what type of income you plan on making once you find a job. For us although we could have paid cash our financial advisor cautioned us against it because at our income we would have been paying uncle Sam a hefty amount. So really much depends on your income and if you have a substantial enough write off to counter balance it. There are also other factors that weigh in with this as well. We were advised to take out a loan and to invest our other assets with a nice return as well as in different things that help rather than hinder as far as tax breaks are concerned. I agree, before making this decision go and see someone who will be able to make sure you have all your ducks in a row so you don't get hurt later on. After all you want to make the most of your money!

[SMW]

You can pay cash for the house and then open up an equity line for any major purchases (car, furniture, education, etc.) and deduct that interest. I also feel that if I am losing out on $1,000 in deductable mortgage interest for example, I'd rather pay $1,000 to a charity that means something to me than to a bank. In most case that charity gift will be deductable.

[bigchuckie]

Cash is king skip the banker BS and just buy it. Who wants a mortage anyway

[Miker2069]

Originally Posted by CAKD

I think it really depends on what type of income you plan on making once you find a job. For us although we could have paid cash our financial advisor cautioned us against it because at our income we would have been paying uncle Sam a hefty amount. So really much depends on your income and if you have a substantial enough write off to counter balance it. There are also other factors that weigh in with this as well. We were advised to take out a loan and to invest our other assets with a nice return as well as in different things that help rather than hinder as far as tax breaks are concerned. I agree, before making this decision go and see someone who will be able to make sure you have all your ducks in a row so you don't get hurt later on. After all you want to make the most of your money!

I have to say, that's party line advice (not necesarily just your advisor, but a majority of advisors say this). We've come to think that it's always a good thing to have a mortgage tax deduction. I've realized it's mostly better for the bank, then for the mortgagee. Instead of sending the bank that interest payment to *save money*, why not take the monthly mortgage payment you would have paid and invest it? The formula is completely changed then. Instead of sending away you can make 8%+ in a good no load mutual fund.

A famous quote that I always replay in the back of mind when it comes to financing stuff...

"The borrower is slave to the lender..."...very very true.

[okaydorothy]

We are in your same situation. We re hoping to pay cash for our house only because we just dont want a mortgage. Our builder is offering incentives if we take a mortgage ; also if we use their lawyer. So we get a small incentive to use the lawyer.

I just think that by using cash, your equity will increase as the maket does, and you arent a slave to the bank.

Well done
Dorothy