Although historically home buying is a good inveestment, this is not been true the past 10 years. While many people want to own their own home, at this moment in time, your money could probably be put to better use.
If you need help with financing, I can lend in your area.
Feel free to send me an email or give me a call!
If you can make (conservatively speaking) more money somewhere else, then you can go for a mortgage. Age should be considered as well - as most people try to pay off their mortgage by their retirement.
To give you an idea: 400K mortgage 3.75% interest 30 yr fixed P&I = $1,852.46 Interest paid over 30 yr period $$266,886. If the term is 15yr fixed and rate is 3.5% P&I = $2,860, interest paid over 15 yr period $114,715.
Besides money market fund (not that great of an interest, especially considering inflation), there are many other investment options for you.
F.e. investment of your self-directed IRA (SD IRA), real estate investments of different kinds...and more...
In the end of the day, besides math, you got to be very comfortable with whatever choice you make.
Hope this helps,
Beachfront Realty, Inc.
With that said, you must be doing something right because you have enough cash to purchase a home. But, if you consider inflation and the cost of money, money is actually free right now because the cost of living is around 4%.
One thing you may want to do is use the cash to negotiate a better purchase for yourself, and then pull 65-75% back out when you refi. This way your money can work for you and when rates go back up in a couple of years, you will be sitting pretty with a 4% loan that will look like a storke of genius.
If you pay all-cash then you save a ton of money because the monthly interest due on your mortgage will be significant. If you got a mortgage at 4% it would be worth it if you could invest that money and earn more than 4% compounded monthly, especially since the interest paid on a home mortgage is still a tax deduction. It may not be for long though. The Fed is thinking about eliminating the mortgage interest deduction.
You could run the numbers, but I wouldn't bother. I don't think it is possible to invest in anything as safe as a home and earn more than 4% these days. Plus, just knowing that you earn your home free and clean makes you feel great. However, if you think you will need some cash in the near future, then you may want to get a mortgage.
Want some help finding that home you will own free and clear? I deal mostly with buyers and would like meet and consult with you.
In terms of cash giving you leverage... That clearly depends on your local market. Maybe you may get the deal because you're all cash but getting the deal less than others because of it usually is unlikely in low inventory markets.
Why don't you get pre-qualified by a good local lender so you can make that decision when the time comes. It's not like it will hurt.
Here is a thought for you.
Buying with cash can sometimes sway a seller towards your offer compared to an offer with a financing / appraisal contingency. You may get a slightly better deal this way.
Now how do you " have your cake and eat it" ?
You set a purchase as an all cash trnasaction and work with a lender who will lend on it straight after closing. They need to know this well in advance of you writing the offer, but if you do this then you can save a little on the purchase price and pull 80% of the cash out and put it in the investments you want too.
I always think outside the box, so if you want some good ideas and a great agent as well give me a call.
If you are trying to obtain a house in a very competitive market, offering all cash will increase the odds of obtaining the house desired. However, there will be other alternatives for your cash to earn perhaps greater interest in the market, but with risk as to the markets ups and downs.
Remember that you don't fully own a house until you have paid off your mortgage, so I am of the personal consideration that if you are moving for a long-term investment in a great space you want to live, paying off your house can be a very smart decision!
Also, in the event inflation takes hold, your mortgage will seem smaller and smaller as time goes on. That is as long as you have a fixed rate.
One last item to consider is the deduction of your mortgage interest payments. I hope this was helpful.
best of luck,
Oggi Kashi - 415.690.3792 direct
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.
Better Homes & Gardens/Mason-McDuffie Real Estate
2200 Union Street
San Francisco, CA 94123