Fair credit should work??????? Some of the best real estate values are currently coming from foreclosure purchases and banks like "cash" when it comes to these types of purchases. As a matter of fact, in many locations they will accept cash offers that are lower than financed offers with letters of pre-approval.
You find yourself in a very advantageous position by being able to pay cash or electing to take advantage of the excellent financing opportunities that are currently available. The nice this about your position is that you can hold your capital in reserve for future opportunutues/needs and/or choose to pay off the loan earlier if you so choose.
Our recommendation is to meet with several loan specialists to explore you options prior to making your decision. Your dilemma is a nice one to have....
Only the interest paid is deductible, and only if you file using itemized expenses.
Let's say you pay $5,000 in interest expense for the whole year, and let's assume it's all deductible (which, depending on your situation, it may or may NOT be - check with your accountant). You get to deduct as an itemized deduction that $5,000 in interest expense. Assuming it drops dollar-for-dollar to reduce your taxable income (and it might not - again, check with your accountant) you'll save taxes at the marginal rate you pay. If you're in the highest federal tax bracket which for 2012 is 35%, your actual dollar tax savings would be $5,000 x 35% = $1,750. Nice tax savings, right?
WRONG. You paid a bank $5,000 for the "privilege" of "saving" $1,750 on your taxes. Maybe you like the bank a whole lot better than the government (it's kind of hard to like either one, in my view), but it COST you $3,250 in real money. And if you're in a lower tax bracket, the "Cost" is even higher, perhaps much higher.
Why would you do something that's going to cost you (at best) almost 2 times the savings just to reduce your tax bill? I like to pay the smallest legal amount of taxes too, but paying interest when you do not have to makes zero financial sense.
As far as buying, I think it is always to your advantage to buy with cash, if you can. Generally a better deal can be made because you can close quicker and the seller doesn't need to worry about your financing going through. At some point in the future, you can put a mortgage on the home which is easier to do once you own the property. Certainly consult a mortgage specialist before doing anything.
Your first step should be to meet with a local mortgage broker, they can look at yoru credit and whole financial picture, they can then let you know if you should pay with cash and refinace or if you should get a mortgage right from the start. they will also be able to tell you how you can boost your credit score for the future. please feel free to email me with any questions.
for more info and advice on obtaing a mortgage , please see my blog
There are many loan programs available in NH for buyers with fair credit. I would also suggest contacting a mortgage lender to find out your options.
I am in Southern NH - let me know if I can be of any help!
The home equity line is a good solution to having cash available once you purchase. Make sure you look over all the details, many lines are open for 10 years with a re-check of your financial situation / credit at 5 years. If you have the ability to pay cash for a property, you will be putting yourself in a great buying position, able to negotiate the purchase price because a cash offer is most often the strongest offer presented to a seller. With a good agent working on your behalf, you could save far more than you would paying out for interest on a mortgage, while receiving the tax benefits of having one. If you are interested in working with a "Home Buyers Agent" and are not currently, please contact me so I can help you. I have several mortgage specialists that I work closely with that would be happy to sit down with you and go over options that would best meet your current and future needs.
Nicole Bizzaro, REALTOR
Keller Williams Coastal Realty
So, I would make this decision based upon whether I could get a HELOC immediately or not, and at what interest rate. That way, if you need cash after purchase, you will have access to it.
Usually the tax advantages you cite aren't enough to offset the mortgage expense. Run the specific numbers and see for yourself, see which strategy is less expensive for you. You'll probably find that paying all cash is the most economical move.
Scott Miller, Realty Associates, Boca Raton, FL
As Kevin mentions, there are several different scenarios and a good lender will be able to answer your questions and guide you through your available options.
If you aren't currently working with a lender, please let me know. I'll be glad to forward a couple contacts for you that my clients have been very pleased with. And if you would like some help with finding a property, I'd welcome the opportunity to help you with your home search.
In your situation I would contact a lender to see what they suggest to you. There could be things done to help your credit score that you are currently unaware of.