In this market if you have the money in the bank for the amount of the house you want to buy, should you pay cash or take out a loan?

Asked by Skip, North Syracuse, NY Sat Sep 10, 2011

On Suzy Orman's program last week she said if you have the cash in the bank that's only earning 1 to 2 % why would you pay over 5% for a home loan?? She also said as long as you have a good income !! We own our current home with no mortgage just school & property taxes,etc . We are thinking of renting our current home.

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Julie Kimmel, Agent, Philadelphia, PA
Sat Sep 10, 2011
As much as I love Suzy, I would have to agree with her here. Although, potential earnings might be low now, over the next 30 years they are more than likely to average much higher. AND shes not taking into accont that MORTGAGE INTEREST IS A TAX DEDUCTION. Depending on your income and other tax factors this would most likely bring the cost of mortgage interest which is currently around 4% for a 30yr fixed here in Philly, below even that after tax considerations!
1 vote
Bgabra, Home Buyer, Hackensack, NJ
Wed Sep 19, 2012
why would you pay cash, if you have better investment opportunity. Real estate is a long term investment and it 's not easy cash melting. Cash is king and you can invest in a better cash generating pool.
0 votes
Jolie Muss, , Upper West Side, New York, NY
Wed Sep 14, 2011
Hello again skip,
Have you any experience in being a landlord? That can be a full-time job. I would say it's not in your best interest to put all your money in a house as there can be tax advantages (but only your tax advisor can tell you that) also you might need to be able to get your hand on the money and it will be tied up in the house. Good luck!
0 votes
David Zehner, Agent, Onondaga, NY
Sat Sep 10, 2011
Interest rates are very low. At 4% your after tax cost is closser to 3%. While a 3% gain on investment might be difficult this year. Over the 30 years of the mortgage, you should have no problem averaging a 7 to 10
% return on your money.

Talk to a financial planner, but you have options.
0 votes
Mary Ann Bar…, Agent, Canastota, NY
Sat Sep 10, 2011
The best advise I could give would be to check with a financial advisor, renting your home may or may not be the best idea it would depend on how much you know about being a landlord, not the easiest job in the world the toughest part is having tenants who treat your home as if it is their own and keep the maintainence up or at least notify the landlord if there is a problem, just finding someone who knows how to run a household is hard enough
0 votes
Maureen Dess…, Agent, Fayetteville, NY
Sat Sep 10, 2011
I would have to say if you have the cash pay for the house!
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sat Sep 10, 2011
To see what makes most sense and is most beneficial for you, consult with your tax professional and or financial planner.....
0 votes
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