Buy a home with cash?

[harley]

This is a good answer. Paying cash makes buying so very much easier and can be quite enticing for the seller. You also save a LOT of money in closing costs.

As far as getting a mortgage AFTER purchase, this might be a little more challenging...at least if you are seeking a 100% LTV loan. A HELOC could be useful in case you might need a cash infusion after the cash purchase.

We bought our last two homes for cash and would highly recommend that, but we have "lost out" on some significant increases in our investments with how the market has performed. Then again, we had some significant gains on our Atlanta house (and no cap gains taxes!) and if we were to sell our current house, we would probably do pretty well with that, too. OF COURSE...this fact can't be predicted so it's more of a "what makes you comfortable" situation (in regards to cash/finance question).

I don't agree. You can get a mortgage at an incredibly low rate, while a LOC is (AFAIK) always variable. So if the SHTF and you decide you need the money, you may end up paying a much higher rate. If you get the mortgage, and rates go up, CD rates and other interest rates will most likely rise too, making your mortgage a money maker.

Btw, I'm a known pro-mortgage poster, so take my advice with a grain of salt. But I that's definitely what I would do in your situation.

 

[Surewhitey]

One last question. About how much would I save on closing costs paying cash instead of financing?

I would round up to 2% for everything, personally. Without the loan, just the documentation fee at title company. I sometimes get an inspection if there is something I noticed out of the ordinary. Our current & last home we did not.

We also got first dibs (one pre-listing, one a death of owner) we felt like this was a $10-15k savings, but never know since they took our offers. One didn't want to have tons of open houses (moving into retirement community).

Common Texas Buyer Closing Costs:

Loan origination fees (optional) – 0.5% to 1.5% of the sales price: These costs relate to any associated loan fees including application fees, prepaid interest, and loan origination fees. While a loan is optional, these will be present if a mortgage is secured to purchase the home.
Appraisal – $300 to $500: An appraisal determines the value of a home to assure the lender the property is indeed worth the amount they are giving the buyer. The appraisal is often paid by credit card up front and therefore not due at the time of closing.
Survey (optional) – $350 to $500: Many lenders will require a survey of the property to determine the location of any buildings and the property's boundaries. Costs typically vary depending on lot size and type of property.
Credit report – $25 to $75: This fee covers the cost for the lender to pull the buyer's credit history and credit score.
Home inspection – $250 to $600: Conducted before closing, a home inspection will reveal any major issues with a home such as structural or foundational damage. Costs vary by company and city — for instance, in Dallas, a home inspection could cost you $320.
Recording Fees – varies by county: This fee covers the cost of registering the sale and transfer of your property. Once the deed of transfer is recorded, it will become part of the public record.

 

[Montecfo]

In this environment I would probably do a mortgage. Super low rates and an inflation hedge to boot.

 

[Bamaman]

I've always considered a paid for home to be an Ace in The Hole in retirement. I'm fortunate to have two "first" homes--one in town and one on the lake--that are paid for.

Sure I could have taken an ultra low rate mortgage and invested in the market. But in retirement I desire to be on "cruise control" when it comes to the Equities. I don't want to think about working my money any longer.

I think it's all a matter of cash flow. If you have the cash flow to handle a mortgage, go for it. In my case, it's 14 years after ER before starting RMD's to where I'd have the cash flow to handle a mortgage payment. I choose to keep life simple at this point in my life.

 

[ExFlyBoy5]

In this environment I would probably do a mortgage. Super low rates and an inflation hedge to boot.

Hopefully the OP has pulled the trigger one way or another. In the 3 months since their post, the house they wanted has probably gone up 52% in value.

 

[jr6035]

I plan on paying cash. But no way am I dipping my toe in this market. As much as it hurts, I have all the equity from my last paid off house in a 3 month CD. The rest of my cash is also in a 3 month CD. It hurts, but you gotta be ready to pull the trigger. I'm 60, and averse to debt.

 

[Karloff]

This thread feels very close to me because we are in the same exact boat.

I actually created a thread about this myself, awhile ago. You can read it here:
https://www.early-retirement.org/fo...ed-of-getting-a-mortgage-part-2-a-107796.html

I tend to change my mind on the subject from time to time. We recently bought a new construction home and put 10% down while we wait for the home to be ready in a few months. We sold our previous home and are renting in the meantime.

We could pay cash for the new place as well. It would be 60% of our cash reserves, and about 50% of our overall net worth (we are mostly in cash in anticipation of the purchase). The remaining 40% would equal to more cash than what the OP specified, however. I feel that it is more than enough for our specific situation, and we are in our early 40's so we have time to catch up.


I thought about a scenario where we put 80% down and finance 20% of the purchase price at less than 3% to have a bit more liquidity, but most of the time I feel like this would not allow me to sleep good at night. Plus, I *hate* the paperwork and BS involved with simply procuring a mortgage, and the closing costs are literally 3 to 4 times higher. So, while ***everybody*** around me calls me stupid and thinks I am crazy for not taking a mortgage, I believe I am also in the *no* debt camp.

If I could get a 3/4% more-or-less-safe return anywhere today, I would go with the 80% down /20% mortgage scenario, however. But there really is no such thing. So even at 3% interest, that is a LOT more than I will be paying the bank compared to what they pay me at around 0.05%. So why would I keep giving them more money? They give us nothing.

 

[Scuba]

This thread feels very close to me because we are in the same exact boat.



I actually created a thread about this myself, awhile ago. You can read it here:

https://www.early-retirement.org/fo...ed-of-getting-a-mortgage-part-2-a-107796.html



I tend to change my mind on the subject from time to time. We recently bought a new construction home and put 10% down while we wait for the home to be ready in a few months. We sold our previous home and are renting in the meantime.



We could pay cash for the new place as well. It would be 60% of our cash reserves, and about 50% of our overall net worth (we are mostly in cash in anticipation of the purchase). The remaining 40% would equal to more cash than what the OP specified, however. I feel that it is more than enough for our specific situation, and we are in our early 40's so we have time to catch up.





I thought about a scenario where we put 80% down and finance 20% of the purchase price at less than 3% to have a bit more liquidity, but most of the time I feel like this would not allow me to sleep good at night. Plus, I *hate* the paperwork and BS involved with simply procuring a mortgage, and the closing costs are literally 3 to 4 times higher. So, while ***everybody*** around me calls me stupid and thinks I am crazy for not taking a mortgage, I believe I am also in the *no* debt camp.



If I could get a 3/4% more-or-less-safe return anywhere today, I would go with the 80% down /20% mortgage scenario, however. But there really is no such thing. So even at 3% interest, that is a LOT more than I will be paying the bank compared to what they pay me at around 0.05%. So why would I keep giving them more money? They give us nothing.

The reason why, for me, is that my investment returns on average over the last 35 years have far exceeded 3-4% per year. Thus I find it logical to use debt so that I can remain invested as much as possible.

I also sleep better at night with liquidity. Some people sleep better at night with no debt, but less liquidity. Whatever works for you!

 

[travelover]

We bought 3 years ago. We really loved the house and didn't want to lose it by being outbid, so we bid over the asking price. Later we found out we'd been outbid by $25,000, yet the seller chose us because we were paying cash. That ensured a quick sale with no chance of the appraisal coming in too low for the higher bidder. At the time, it didn't occur to us that paying cash was an advantage, we just did it as we were rolling over the proceeds from the last house plus a little after tax cash.

 

[RetireeRobert]

We bought 3 years ago. We really loved the house and didn't want to lose it by being outbid, so we bid over the asking price. Later we found out we'd been outbid by $25,000, yet the seller chose us because we were paying cash. That ensured a quick sale with no chance of the appraisal coming in too low for the higher bidder. At the time, it didn't occur to us that paying cash was an advantage, we just did it as we were rolling over the proceeds from the last house plus a little after tax cash.

As the old maxim says, "Cash is king"!

 

[Dtail]

We bought 3 years ago. We really loved the house and didn't want to lose it by being outbid, so we bid over the asking price. Later we found out we'd been outbid by $25,000, yet the seller chose us because we were paying cash. That ensured a quick sale with no chance of the appraisal coming in too low for the higher bidder. At the time, it didn't occur to us that paying cash was an advantage, we just did it as we were rolling over the proceeds from the last house plus a little after tax cash.

The house we bought 2 years ago had 10 offers on it. We were the 3 largest at 31k over the bid, but were chosen due to paying in cash.
House is up 25% since then.

 

[Taxman59]

I bought a second home with cash. When I made the offer to buy (it wasn't on the market yet). I emphasized that I could close in 3-5 days after acceptance. I think that was a big reason I now have a 15-25% gain in the property after just3 months.