Pay Cash Verses Mortgage is a hard decision and could use some good thought and understanding These are questions as a Professional Realtor I face everyday in the Greater Oakland County Mi from some Home Buyers. Pay Cash verses Mortgage can be a tough decision for Home Buyers, and I’m not a financial adviser by far and cannot give that sort of advice to my Home Buyers, it is a question many have. Pay Cash verses Mortgage needs some food for thought and much consideration when deciding either way,
There are ups and downs in deciding to Pay Cash verses Mortgage and wanted to share them to help educate Home Buyers to the differences of both options. I do hope this information is helpful and helps to guide and educated Home Buyers into making the right decision that is best for them. Are you considering paying cash vs a Mortgage for a home? Perhaps you sold a more-expensive home or you’ve received a substantial inheritance. Maybe you have a lifetime of savings stockpiled—or you won the lottery! Being freed-up from a mortgage payment seems like a great idea at first glance. You would have no more worries about missing payments—or having your home foreclosed on. Not having a monthly mortgage payment—usually the largest payment a homeowner makes—could free up monthly income for other purposes.
- The flip side deciding to Pay Cash verses Mortgage that tying up most or all of your cash in your home may not leave you with the flexibility to pay for other things (e.g., college fees, living expenses, healthcare costs) or to respond to emergencies. Although you might later be able to tap your home’s equity with an equity loan or line of credit, doing so takes some time, and you would likely end up paying a higher interest rate than if you had taken out a mortgage to begin with.
- Pay Cash verses Mortgage means you will be lacking a mortgage meaning you would forego the opportunity to shelter some of your income by deducting mortgage interest expenses from taxes.Rather than putting all your cash toward a home purchase, consider a large down payment and an accelerated pay-off plan, such as a shorter-term 10-, 15- or 20-year mortgage. This way, you can use your income to pay off the mortgage sooner, and you still have “liquidity” for other investments and rainy days.
- Big red tax-break flag: If you should decide to take a mortgage out on your home more than 90 days after you purchase it, and you don’t use the money to improve your home, the mortgage would be considered “home equity debt.” In this case, you would only be able to deduct mortgage interest payments on up to $100,000 of your debt ($50,000 if married filing separately).
- When you take a mortgage to purchase a home within 90 days before or after the purchase, it is considered “home acquisition debt”—allowing you to itemize interest-payment deductions on mortgage debt up to $1 million ($500,000 if married filing separately).
- Today’s still-low mortgage interest rates make borrowing inexpensive and paying cash verses mortgage that much more of a challenge. With a mortgage and more freed-up cash, you could put your money into stocks, bonds and other investments that can yield significantly higher returns than what you would save by not paying mortgage interest
- Be sure to consult a financial professional to find out how paying cash or taking a mortgage would impact your unique situation and future plans. You can also get more information at www.IRS.gov; search for Publication 936, Home Mortgage Interest Deduction.
Paying Cash verses Mortgage is a challenging question and it of course is based on every Home Buyers particulate situation. I hope this helps..and remember to seek out a professional Financial Advisory to discuss what is best for you. Happy Home Hunting!