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Someone from the mortgage industry must've given you that advice......
Paying something in full w/o paying interest?
Now THERE'S a concept!
Or maybe the person advising it had a great idea on how that money could be used to make profit for both of them? Well if not for both of them, then for them as a fee.
Advantage of no mortgage is no foreclosure. Just pay your taxes and you survive any personal fianancial downturn. Take the money you aren't paying on your mortgage and continue to invest it. What is the one reason so many Americans are unable to retire? Debt and more debt and for many of them it is their mortgage.
We will pay cash for your new home when we retire and relocate to another part of the country late this summer - we are moving to an area where homes prices have never dropped and continue a small but steady climb, so we will be sinking our cash into a good investment that should continue to appreciate.
We want the personal satisfaction of owning our own home - yes, no interest deduction on our income taxes, but we have other deductions that will help us in that department. We don't ever have to worry about house payments and our biggest asset will be all ours - not some bank's.
Just been there and done that and you are right on.
Looking at it as a matter of credit score rating:
If you purchase your house out right will that do anything for your credit?
If you wanted to raise your score should your finance then pay the rest off in your first payment (or something along those lines)?
Or would huge collateral such as a house (whether financed and then paid off or just purchased out right) mean good standing in the eyes of potential creditors?
>> If you purchase your house out right will that do anything for your credit?
Assuming you purchase with cash, this will not help or hurt your FICO score.
>> If you wanted to raise your score should your finance then pay the rest off in your first payment (or something along those lines)?
That's rather extreme, but this would certainly help your FICO score in the long run, and would be especially helpful when detailed payment history is concerned.
>> Or would huge collateral such as a house (whether financed and then paid off or just purchased out right) mean good standing in the eyes of potential creditors?
Creditors care about your assets when they are putting a lien on your property. Assets can be very beneficial when you are applying for a loan. For example, to increase your credit card limit above $100,000, most card issuing bank's require that you have $700,000 in liquid assets. However, a home is not considered liquid, but it is something you can mortgage or that a creditor can put a lien on.
Someone asked this question on the mortgage section so I'm going to cut and paste the reply that I had then. It's a interesting topic and I love reading all the responses.
Anyway - This is what I wrote:
I don't know much about the tax laws and interest deduction. I have a simpler mindset.
I don't like to be cash poor either - we were in the same position pay cash or finance when we sold our house in CA and moved to TX. We chose to keep enough from the sale of our CA home (equal to one year salary) and use the rest to purchase a home. We chose to keep one year salary because my husband works and I stay home and raise our daughter.
Since our loan in relation to value on our new home was only 20% we got a equity line of credit and put the checks in the safe for just in case.
That was how we chose to handle it and it helps me sleep at night since there is only one breadwinner in the family.
I'm of the Suze Orman mindset - I don't like debt of any kind. I would prefer to have no mtg but everyone needs reserves.
Someone asked this question on the mortgage section so I'm going to cut and paste the reply that I had then. It's a interesting topic and I love reading all the responses.
Anyway - This is what I wrote:
I don't know much about the tax laws and interest deduction. I have a simpler mindset.
I don't like to be cash poor either - we were in the same position pay cash or finance when we sold our house in CA and moved to TX. We chose to keep enough from the sale of our CA home (equal to one year salary) and use the rest to purchase a home. We chose to keep one year salary because my husband works and I stay home and raise our daughter.
Since our loan in relation to value on our new home was only 20% we got a equity line of credit and put the checks in the safe for just in case.
That was how we chose to handle it and it helps me sleep at night since there is only one breadwinner in the family.
I'm of the Suze Orman mindset - I don't like debt of any kind. I would prefer to have no mtg but everyone needs reserves.
That's a different argument. If I was going to be "cash poor" then I would rethink that. I think the majority of answers were based on being comfortable even after buying outright w/cash
That's a different argument. If I was going to be "cash poor" then I would rethink that. I think the majority of answers were based on being comfortable even after buying outright w/cash
O.K. Fair enough ~
Personally, I think owning your home is important and I don't think it's "foolish to buy with cash".
I do believe it's important to save some money for reserves after the purchase to weather any unexpected storms, job losses, medical expenses - just the basic unpredictability of life.
>> If you purchase your house out right will that do anything for your credit?
Assuming you purchase with cash, this will not help or hurt your FICO score.
>> If you wanted to raise your score should your finance then pay the rest off in your first payment (or something along those lines)?
That's rather extreme, but this would certainly help your FICO score in the long run, and would be especially helpful when detailed payment history is concerned.
>> Or would huge collateral such as a house (whether financed and then paid off or just purchased out right) mean good standing in the eyes of potential creditors?
Creditors care about your assets when they are putting a lien on your property. Assets can be very beneficial when you are applying for a loan. For example, to increase your credit card limit above $100,000, most card issuing bank's require that you have $700,000 in liquid assets. However, a home is not considered liquid, but it is something you can mortgage or that a creditor can put a lien on.
I intend to buy my next home for cash. That will be my retirement home. No mortgage payments means I can live on less income.
I'm not planning to take on a lot of debt after I retire so I don't care about my FICO score..if I can't afford it with what I have in the bank..then I'm not buying it.
Debt is what gets people in trouble to begin with.
I'm probably the first generation in my family that had to assume debt to buy my house. If you're paying cash, why care what it does to your FICO score? I think I'd probably be better off without it.
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Yup
