Should I Pay Cash for My Home?
The number of homes purchased with cash in Las
Vegas reached 60% at the peak of the investor
f renzy. This is trending down in 2014. January and
February had 47% cash purchases. In March, 43%
of the homes sold were cash deals.
Why Should You Pay Cash For your
No Financing Available – There are some types of
property which can’t be f inanced. Many of our
condominiums do not have f inancing available.
Banks shy away f rom complexes if there is
litigation. That rules out many condominium
properties where the HOA has sued the developer.
Lenders dislike having more than 50% of the
properties occupied by tenants. This makes
f inancing impossible in a lot of our condo
Financing dried up in the high rise market in 2008 when banks realized it might be over built. We are
seeing some buildings where it is now available. Financing is still unavailable in high rise buildings with
litigation and condo hotels.
Buyers using FHA loans are especially limited when buying a condo. Few complexes have maintained
their FHA approval rating. Mortgage Expert Tim Lucas recently announced “FHA May Allow One Of f
‘Spot’Approvals Again“. FHA f inancing f or condos may become available in the f uture. It would be a
huge boost to the Las Vegas condo market.
Price – If you’re in a position to buy with cash you may be able to negotiate a better price. Sellers
pref er cash buyers because they don’t have to worry that a buyer’s f inancing may f all through at the
No Appraisal Needed – Cash buyers don’t need an appraisal contingency. This is a big advantage
in an improving market where appraisals have not kept up with property values.
Quick Closes – Cash buyers can close quick. This part has been especially usef ul in negotiating
price on a cash deal. Sellers with a high monthly HOA or mortgage payment may f ind a buyer who can
close quick appealing.
No Monthly Mortgage Payment – Paying cash means no monthly mortgage payment. You own the
home, not the bank, the credit union or the investor who bought the mortgage.
For many, especially retirees who may be living on a limited income, this security is the priority. This
can be a great idea if you also have enough cash reserves to cover emergencies.
Why Should You Finance Your Home?
Most buyers do need a mortgage. If you do have
the f unds available to buy with cash, there may be
advantages to obtaining a mortgage.
Low Interest Rates – Today’s interest rates are
still at a historical low. You can borrow money
much cheaper than you’re likely to be able to
borrow in the f uture. Is there an investment that
will earn you a higher return on your cash than the
interest you would pay on a mortgage?
Cash Reserves – If you pay cash, will you have
enough reserves to cover your living expenses in case of an emergency? It’s always better to have a
little cash on hand. If the home’s price would wipe out your savings, you should consider a mortgage.
This is especially true f or the elderly. While they may qualif y f or a mortgage at low rates today, rates
may not be f avorable tomorrow.
Tax Advantages – This is a matter to discuss with your tax preparer or estate planner. The
mortgage interest f or your primary home may be used as a deduction on Federal taxes. Tax savings
may f avor using a mortgage rather than paying cash.
Jumbo Loans – Luxury homes are of ten sold to cash buyers. Today’s low interest rates make
jumbo loans appealing to the af f luent. For more detail on jumbo loans, read Inlanta Mortgage “Could
a Jumbo Mortgage be a Wise Move f or High Net Worth Individuals?”
Should I Pay Cash for My Home?
This is a question that has a dif f erent answer based on your personal situation and the home you
are buying. Discuss the pros and cons with your f inancial advisers as well as a lender. Today’s low
interest rates may give you a lower monthly payment than you expect and may allow you to buy the
home of your dreams.
Debbie Drummond is a top-producing Realtor in Las Vegas. Planning to buy or sell your Las Vegas
home? Call (702)354-6900 or email Debbie@LVHomePro.com