While research shows that more large investors are starting to back away from the real estate market, cash still remains king for home purchases. According to industry reports, all-cash sales have accounted for nearly 43% of residential sales in the United States in the first quarter of 2014. If you’re considering buying a luxury Laguna home, you may be wondering whether you should opt for an all-cash deal or secure financing instead. Let’s take a look at the pros and cons of both.
Buying With Cash – Pros
One of the biggest pros of buying with cash is peace of mind. You will not have to worry about how you are going to afford your monthly mortgage payments in the future if the house is paid for outright. All-cash deals often tend to be easier than those that involve financing, with less strategizing and paperwork to worry about. Sellers may also be more likely to offer a reduction on the price of the home for those who pay with cash, and there are fewer fees involved with all-cash deals. Sellers might also be more likely to accept an offer for an all-cash deal over one that is financed, simply because the process is easier for them.
Buying With Cash – Cons
One of the drawbacks of buying a home with cash is that of liquidity. If you find yourself with some unexpected expenses such as an illness, you can only get money out of your home by selling it or borrowing against it. It is also good to keep in mind that if you are paying with cash and intend to pass the home down to your family, they will still be subject to a gift tax regardless of whether or not their name has been added to the deed.
Financing – Pros
If you are a potential homeowner and you would like to improve your credit score, securing a mortgage can help. This type of loan is seen as “good debt” and can help raise your score, making it easier for you to secure loans in the future. You can also derive tax benefits from having a mortgage that you may decide are more beneficial for your financial situation than paying for a home with cash. In addition, if there are other financial investments that you are considering that might give you a higher rate of return than what the mortgage will cost you, it might make sense to invest your money there and get a low cost mortgage.
Financing – Cons
Having a mortgage means committing to monthly payments until the home is paid off. If your financial situation is somewhat unstable and you foresee not having a reliable source of income down the road, you may not want the added pressure and stress of a monthly mortgage payment.
If you are interested in purchasing a home in Laguna Beach and are unsure if an all-cash deal is right for you, let us help! We here at The Stanaland Group are experts in our local market and can advise on the strategy that is best for you.