Depends on your financials, if you have enough for a cash purchase and enough leftover why not.

Anna
917-576-5376
abrocco@laffey.com

The answers below are good. Financially, from your perspective, you should consider all the listed factors (inflation, tax deductibility, etc.). Also make sure that if you buy with cash, that you have enough money left over to cover emergencies and other needs; you don't want every last penny tied up in a house. True, you probably could finance it and pull some money out, but as we're currently seeing financial markets change and people's plans of a few years ago sometimes aren't working out today.

The big argument in favor of cash is that you may be able to get a much better deal. If that were your goal, it's definitely something to consider. But your concern seems to be more the "harmful" nature of a mortgage. Please look into that further; I don't feel that borrowing money for an investment (and thus paying interest on the borrowed money) is "harmful"--not if the purchase is a good one to begin with.

One thing I didn't see mentioned below is the leverage you gain in a rising market. Yes, I know the market isn't going up at the moment. But at some point--a year, two years--it will start going up. (And some markets are even appreciating now.) So, even if you were conservative and put, say, 20% down, and the market remained flat for a couple of years, then appreciated a modest 4% a year after that, your ROI (return on investment) the first couple of years would be 0% (but you'd still have 80% of your cash to do other things with); then your ROI would go up to 20% a year (4% appreciation, with 5-1 leverage) on the money you'd put into your home.

Check with an accountant, of course. And only do what you're comfortable doing. But that's a strategy you at least might consider.

Hope that helps.

In this economy, you betcha

Donna, If you're comfortable with buying a home with cash so you can have no mortage then do it. You'll still have property Taxes to content with , New York is one of the worst states for keeping property taxes under control, plus Homeowner's insurance too but far less than rent. If this makes you sleep better at night, put a smile on your face and make you feel financialy secure--then by all means do it!! Too many folks over the past 7 years got talked into zero down scenarios or little down loans and are now up against it, in default, or back renting.
I could go on about the actual cost of money factoring in inflation as Zack did below, tax benefits, etc. But it all gets down to how YOU feel about this. In a market retrenching using a cash deal will mean everytime the market readjusts DOWN you'll be loosing CASH. Also,when the market goes up eventually (god only knows when that will happen!!) you'll find your return on investment much less with NO leverage. But like I said earlier, who gives a bleep if you can't get any sleep!!

One thing high schools need to start teaching is real life money skills. Joe's answer is a good one but he didn't go far enough. You need to account for inflation also. With inflation rates being what they are now, your mortgage payment today will shrink at the equivalent of about 3% a year. If you think of this in terms of bananas, say today you could buy 1500 bananas with a monthly payment, in 10 years, you could only buy 1150 bananas (assuming 3% inflation) with your mortgage payment. Couple this with the tax break and its rarely a good plan to buy a house in cash. If you've been able to save enough money for this to be an option, you are disciplined enough to invest the money and be able to make more than the 3-4% you're paying in interest.

It all depends on what you can do with those money you don't put down. With current interest rates 6% or less and interest being tax deductible you effective rate is only about 4% (assuming 25-28% marginal tax rate). If you can invest your money long term yelding more than 4% than it makes much more sense to put only about 20% down. If your goal is short term and you want to resell it pretty soon than putting all cash makes much more sense.

Yes because you have 100% equity in the home immediately. However, you should make sure your a not overpaying for a house in this market because you are losing equity when you do that. The house will appreciate and you will increase the value of your original investment. Yes, you do get a deduction for interest, but from a cash flow perspective, sometimes no mortgage makes more sense. Is it a primary residence or is it a rental property. Would a mortgage make it not cost effective for a rental property or could you pass along all charges plus make a profit on the rent? All questions to ask before you pay cash.

Donna-without being to repetitive from what has already been advised, I personally like being able to buy with cash instead of financing. As you stated, it's nice to keep your money instead of giving it to the bank. Depending on how long you intend to live in the residence, the mortgage deduction starts to dissipate over time. Also, if you keep the house for the full duration, you can see how much interest you'll be paying over the life of the loan. The downside of course is that you are tying up the cash in the house, and you cannot invest in something else that may bring a higher return. Just some things to think about. The argument for the tax deduction one gets for financing a home purchase is a sound one, but keep in mind is it worth it to spend $100.00 to save $25.00 in taxes? It really boils down to in my opinion what, your investment stratagies are with the money. Also, with the down market many areas of the country are facing, if you didn't put a lot of cash into the deal, than you won't be losing very much if any. The upside is if you happened to have put all cash into the deal, you could conceivably hold out in the market until things improved since you were not concered with loan rates rising. You would have a good handle on your monthly costs no matter which way the market went. Also, if you had to sell, a buyer could not leverage the fact that you are behind in your payments and you'd better sell for what they are offering. Also you would not take a hit on your credit. Just some thoughts, not perfect I'm sure but it would be good to also talk to an investment advisor to get other qualified opinions, and to see what else is out there for your investment dollars. Good Luck!

You have more negotiating room with a cash offer...no mortgage contingency clause. You can always put a mortgage on afterwards (or equity loan) and take some of the cash back out.

Cash is King! In most cases a cash purchase is the least expensive sale for the home seller and can improve your overall bargaining position.

On the downside, you need to be skillful in your selection of the property and buy in a stable or rising market area.

Regardless of financing options, to buy in a declining market area can be a short term loss, however for the buyer looking to buy a residential property to occupy for 5 or more years you can buy what you like within reason. Only you can decide what “within reason: actually means.

I recommend finding a reputable agent with many years of experience in the are you are looking to guide you through the selection process.

This all depends on your financial condition.Remember that interest on a mortgage is tax deductable. It is a nice feeling to live in a house without a mortgage payment,but I would call your tax advisor to get the facts that relate to your specific situation.