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People who pay cash for their homes outright are among an extremely rare breed in America. A survey by the National Association of Realtors found that 91 percent of homes purchased in 2010 were financed through a bank. The peace of mind that comes with not having to make a monthly mortgage payment is priceless, and enough of a motivator for anyone with the desire to be an outright homeowner. You’ll never have to worry about foreclosure (unless you’re extremely unlucky), and the property can be passed on from generation-to-generation. The advantages are plentiful if you get yourself in position to make the deal.
1Save and Invest Simultaneously
One of the most common arguments against paying cash for a home is that it would take entirely too long to save up for it. A young couple can easily save for 10 years and pay cash for a home, as opposed to paying three times what the house is worth over 30 years. Low interest rates at banks make savings accounts an impractical method to accumulate your one-time cash payment. A clever, and fiscally-intelligent way to save is to purchase precious metals.
US Money Reserve and other dealers sell gold and silver coins at real-time prices, plus a small commission. Since precious metals are not entirely liquid, you won’t be able to spend your money without going through the process of selling your coins and bars. The price of gold has grown fivefold in the last 10 years, and silver nearly tenfold in that same time period. In other words, had said young couple invested in gold starting in 2002, by 2011, a $300 gold investment would have grown to over $1,800.
2Get the Best Price
Your negotiating power is given a shot of adrenaline when you are able to flash $100,000 cash in front of an REO banker. Financial institutions and municipalities do not want to own real estate, and will bend over backwards trying to get rid of them, even if its at a slight loss. An extreme example happened in Pontiac, Michigan when the Silverdome, the former 82,000-seat home of the Detroit Lions, sold in 2009 for $583,000. The stadium cost more than $55 million to build in 1975.
3No Credit Needed
Though interest rates are highly favorable to home buyers in the current market, restrictions on credit make it extremely difficult for anyone without a 700 or higher score. Paying cash means you bypass the bank altogether, including all the fees and extra closing costs. There is also far less paperwork and no waiting for someone to tell you that you’ve been approved for your dream home.
4Instant Equity
The market value of your home is the amount of equity you will instantly have in it. Though home equity loans would essentially defeat the purpose of paying cash. They generally carry lower interest rates and better terms than credit cards. Small home equity loans to address repairs, medical emergencies, and other issues that inevitably come with homeownership would be more practical than using a high-interest credit card. Home equity loans on your fully-paid-for house to buy luxury items or anything material are unwise.
5No Landlords
One may look at this as a bad or good thing, the advantages is that you don’t have to worry about a rent payment every month. The negative aspect is that many times landlords cover home repairs instead of renters because it is their investment and is in the lease. Know the condition of the house because these repairs can add up very quickly if you aren’t careful.
