Home Buying in Denver>Question Details

Trulia Denver, Home Buyer in Denver, CO

Why would someone finance their home purchase when they could buy it with cash?

Asked by Trulia Denver, Denver, CO Tue Apr 30, 2013

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Trulia Denver,

The main reason would be to keep liquid control of their funds. In many cases the less you put down one a real estate investment, the better. You can use Other Peoples Money to accomplish the same purpose you would with your own. Many (especially investors) with cash available are using some of the good and reputable 'hard money' lenders to accomplish their goals rather than their own money.

Robert McGuire
Your Castle Realestate
0 votes Thank Flag Link Sat May 4, 2013
Because loans are cheaper than inflation, the banks are paying you to take their money!!!!!
0 votes Thank Flag Link Wed May 1, 2013
Cash requires digging up the chest you buried in the backyard or taking apart your mattress. I think it is better to keep your yard nice and sleep on your cash filled mattress and use a loan. I think some of the questions that Trulia asks are silly. Like this answer if you find some of the questions silly.
0 votes Thank Flag Link Wed May 1, 2013
One reason would be to have that cash to do something else with it. For example purchase something else or invest the money.
0 votes Thank Flag Link Tue Apr 30, 2013
Stim covered a good list of possible reasons below, so there is no need to repeat them here. But small business owners often have an additional reason. Mortgage money usually is cheaper than business money. So borrowing against a home instead of taking out a business loan can substantially reduce interest costs in the long run.

0 votes Thank Flag Link Tue Apr 30, 2013
Answers below got it: Leverage. With interest rates as low as they are, borrow ALL you can in the 3% territory. Save your cash to invest in higher returning vehicles. And as also mentioned, there is the tax deduction.
0 votes Thank Flag Link Tue Apr 30, 2013
Tax write off

Keep Assets Liquid

Less Risk
0 votes Thank Flag Link Tue Apr 30, 2013
Good question ! While we all aspire to the day when we are free of mortgage debt, there
are reasons to finance the purchase. They can be listed as follows:
1. We continue to enjoy the option of deducting mortgage interest at tax time.
2. With interest rates so low, why not take advantage and invest your excess capital elsewhere.
3. We are currently enjoying rising prices on our homes. Take advantage of 'leverage' wherein
you invest a small amount of your dollar assets in downpayment; provided you can qualify
and afford the monthly payments.
4. With low mortgage rates, take advantage of 8, 10 or 15 year financing versus 30 year.
5. Build a diversified portfolio to include precious metals; oil & gas; stocks & bond investments.
6. Use your cash to acquire Commercial or Residential rental properties.

Stim Kennedy
Broker, CRS, ABR, NCE, SEC
stimson KENNEDY Realtors
Cell: 303 478.9494
0 votes Thank Flag Link Tue Apr 30, 2013
0 votes Thank Flag Link Tue Apr 30, 2013
Most of my clients are choosing to finance due to rates being so low. They invest with there cash for a higher rate of return at this point but remain flexible at the same time!

Bill Pearson GRI, SRES |"Your Denver Realtor For Life"
ERA Herman Group Real Estate| 201 Columbine Street| Suite 301| Denver CO 80206
720-329-1470 |Bill@DenverRealtorForLife.com
5280 Magazine FIVE STAR Real Estate Professional – 2010, 2011, 2012
"I'm never too busy for your Referrals”
0 votes Thank Flag Link Tue Apr 30, 2013
You can invest the money and get a better return than the amount you are paying for interest on your home. You also get tax savings when you deduct the mortgage interest you paid. Also if you have an emergency and can not work, and need money, the emergency may keep you from being able to refinance or pull the money out of your home. It is better to have some liquid. If you are really like the idea of paying cash, may be split the difference, pay half and finance half, just so you have some of it liquid. When you invest the other half, you can usually get to it easily.
0 votes Thank Flag Link Tue Apr 30, 2013
One word: Leverage. If I have $250k in cash to spend on a house I would rather buy the million dollar house with someone else's money than the $250k house I can buy on my own. It also allows me to share the risk with my lender...
0 votes Thank Flag Link Tue Apr 30, 2013
Because money is less expensive than inflation right now.
0 votes Thank Flag Link Tue Apr 30, 2013
Better use of their money (not tied up in one asset) plus tax savings as mortgage interest is, at least now, tax deductible.
Chuck Strauss
Your Castle Real Estate
0 votes Thank Flag Link Tue Apr 30, 2013
With mortgage interest rates at all time lows and heading lower, there are tons of better investment options that can return more than 2.5%.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Tue Apr 30, 2013
Good question :) The main reason most people opt for financing even if they can purchase with cash is so that they can leverage their funds into more things- more properties, cushier lifestyle, what have you. Most people feel that they can earn more with their money if it's not all tied up in one giant investment like owning a home out-right.
0 votes Thank Flag Link Tue Apr 30, 2013
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