The Benefits and Negatives of an All-Cash Offer
At Oak City Properties, we are often asked the question, “Is buying a home with cash a smart choice?” Whether you are a first-time homebuyer or a seasoned investor, the answer depends on your financial stability and property-owning goals.
Minus the mortgage loan process and additional paperwork, buying a house with cash is almost the same transaction as buying with a mortgage. So, what are the benefits of buying a home with cash? Why would I consider making an all-cash offer?
Benefits of Making an All-Cash Offer
There are several advantages in our current market to making an all-cash offer on a home.
- You don’t have to pay interest if you don’t have a loan!A mortgage can be expensive when you factor in the current interest rate. According to Bankrate, the interest rate for July 2021 is roughly 3.0% for a 30-year fixed mortgage. At that rate, you can expect to pay $420 per month in principal and interest for every $100,000 you borrow.
- Closing Costs are lower. Everyone loves to save money, and paying for a home with cash is a great way to reduce closing costs. While you will still have to pay for taxes, insurance, escrow fees, and all of the other items packed into the due diligence period, you won’t have to worry about the fees associated with the lender.
- You are more attractive to the seller. The mortgage process is time-consuming, and there is always a possibility that the applicant will get turned down or run into some “hiccups” along the way. An all-cash offer means that there is no waiting around for the middleman to get things done and ultimately eliminates extra steps and processes that a seller might not want to deal with.
- You could get a better deal. When you make an all-cash offer, you hold some power during the negotiation process. That fist full of cash makes you much more appealing to the seller which could translate into a lower negotiation price. However, if the market is HOT, an all-cash offer may not carry as much weight.
Negative to Making an All-Cash Offer
When putting an all-cash offer in on a home, you will be tying up a large sum of your money into one asset. That money will not be available to diversify your portfolio through stocks, bonds, etc. It is also important to think about leaving yourself some financial flexibility if a problem were to arise and money is needed quickly. If an all-cash offer means that you have insufficient cash reserves, then it might not be the best option.
Questions to Ask
Before buying with cash, ask yourself these questions:
- What do you hope to gain by purchasing the home with cash?
- How will you benefit from purchasing the home with cash?
- Are there any benefits to having a mortgage instead?
- How much financial flexibility do you have at this point in time?
Want to Read More?
Take a look at additional blogs that may help with the home buying process.
- Home Buying Made Easy- 12 step plan for any home buyer
- Do I have to Get Pre-Approved Before Purchasing a Home?
- Who Pays Closing Costs? Things to know when selling/buying a home
- Who Pays the Realtor Commission?
At Oak City Properties, we have been helping those in the Raleigh area purchase and sell homes for years! We approach each property from both a professional and personal perspective, whether you are a first-time property owner or a seasoned investor.
We are intimately familiar with Raleigh’s real-estate market, so we’re uniquely positioned to guide you through every aspect of the home buying and selling experience. If you are interested in learning more about our services or speak to our listing agents, give us a call at 919-232-9222 or send us a message.