Purchasing a house places a significant financial burden onto yourself and your family. Most homes are obtained with a down payment, and then the rest of the house is paid off over time through a mortgage. There’s a way to avoid having monthly payments weighing you down though, and that’s through buying your house with cash.
If you’re financially gifted enough to be able to consider purchasing a house with cash, there are some things you should know before you decide to take the plunge. Of course, if you pay with cash, you won’t have to worry about missing any mortgage payments. Your credit score will remain unfazed since you haven’t affected your debt-to-income ratio whatsoever. It’s still a big choice and isn’t one to be made lightly, so here’s what you should be aware of before buying that dream home outright:
As an all-cash buyer, you’re extremely attractive to all sellers because they know you’re serious, and that you have the capital required to close the deal. Instead of the seller having to assess whether or not you’re going to qualify for a loan to take you seriously, they will immediately know that dealing with you means the deal won’t fall through because the bank doesn’t want to proceed.
The biggest win you’ll get from an all-cash purchase is completely skirting the mortgage process. It’s increasingly difficult to secure a loan, thanks to the 2008 financial crisis. Also, getting a loan is often a time-consuming and irritating process, even if you’re likely to get approved. If you already have a mortgage on another house or outstanding debt, buying with cash may be your only option.
Next, you’re in a compelling bargaining position when you pay with cash. Sellers are willing to be haggled down several thousand dollars from their asking price because they know that they will have access to that money exceptionally quickly. You’d be surprised how much people are willing to pay for convenience.
If the majority of your cash is used up in the house purchase, you now have much less in your savings to insulate you from any emergencies. Should there be a medical emergency or your car breaks down, you’ll be wholly dependent on your current level of savings to get you out of the jam.
Since buying a house is a large purchase that typically eats up a significant amount of a person’s finances, it isn’t the best choice if you’re someone who prizes diversification of your assets. Cash home buyers in Riverside County are treated well to the relative stability of the market. However, if you happen to live somewhere with less financial security, your asset might significantly depreciate in the event of a housing crash.
Being wealthy enough to purchase a home outright is a great feeling, but actually going through with it isn’t for everybody. If you plan on living in the house for a significant amount of time, or at least long enough to wait however long it takes to sell it for a profit, and don’t want to worry about mortgage payments affecting your lifestyle, then it’s absolutely an attractive choice. If you’re particularly risk-averse or don’t know if you’ll be covered financially in the case of an emergency, then you should probably sleep on it.