I've heard that there are good tax breaks if you have a mortage. Do they offset the interest that you'd be paying when you take out a loan? Which is better, cash or loan?
2006-10-24 05:46:53 · 14 answers · asked by RD 1 in Business & Finance ➔ Renting & Real Estate
If you can pay cash, than cash is better....Remember, you won't have a mortgage and you will OWN your home, if you get into financial trouble, you won't worry about losing your home...I paid cash for my home and it has made my life so much easier and stress free!
2006-10-24 06:26:10 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Get a mortgage loan with terms that you can afford. This way, you are using someone elses money to buy the property. Some say use cash and avoid paying the interest. However, the interest is a tax deductible expense and with todays rates, it really a better deal. Also, you want to keep the cash in case of an emergency. You never know when you might need that money for medical or some other major event. Yes, you could get a loan against the house at a later date, but that usually takes a few weeks to close. Also, the cash will be earning interest income, which can offset some, if not all, of the mortgage interest.
2016-03-28 06:10:38 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Well, the answer depends on what you are going to do with the cash if you don't put it all into the house. It also depends on your age and if you are close to retirement. Most of us don't have the option of paying cash so we get a mortgage and make the payments out of our income. Then the mortgage interest that we pay can be used as a tax deduction to reduce our income and thus reduce taxes. Also, if you have enough money to pay cash for the house you have to consider that mortgage interest rates are very low right now. So if you are a savvy investor you could take out a mortgage paying only around 6 1/2 percent interest, then invest the cash and over the long run you should come out ahead, especially if you are in a moderately high income tax bracket and can deduct the interest expenses.
Please realize that this is a very generalized answer and that only a financial adviser who knows ALL the facts regarding your specific situation can give you personal advice. So you really need to consult a professional before you act on this matter.
2006-10-24 06:02:46 · answer #3 · answered by astrosfan57 2 · 0⤊ 0⤋
As many others said, the tax break will not equal the interest paid, so that alone is not enough reason to get a mortgage. (Note - even if they exactly equalled each other, you'd be letting the government hold the money interest free for a year until you got your refund, so that doesn't make sense.)
However, it depends on what you want to do with the money if you do finance your house. You would need to calculate the actual cost of interest (total interest paid minus tax relief) and compare that to the expected return on the investment you would make with that money to determine which is higher / better for you.
A financial advisor could help you look at some investment options (and their risks) to make that determination. Check with friends to see if anyone can recommend a good advisor.
2006-10-24 06:24:54 · answer #4 · answered by cmc1217 2 · 0⤊ 0⤋
Loan is better but if you want to keep the payments down offer a larger deposit. You will get tax breaks and many times interest can be written off. Also if depends on whether this is your primary home or second. Second homes can have many write offs.
The other draw back to putting all cash in is if you decide to sell it. It forces you to either get full cash out or carry paper. And you would have to get a very large deposit and most can not get that much cash to buy a home. You limit who can buy your home.
I like to save my cash and use it for other investments. Make the cash work for you. When it is just sitting in your home it is not making you money. I use the cash to buy more Real estate to rent out or flip.
Talk to your accountant.
2006-10-24 06:12:53 · answer #5 · answered by Nevada Pokerqueen 6 · 0⤊ 0⤋
The way you should look at it is like an investment. If you get an mortgage you have to calculate your interest. Now if you pay cash you have to compare if the interest you could earn after taxes is more than the cost of interest on your mortgage. Usually it is better to pay off your house, then borrow against it and invest. The cost of interest is tax deductible against any gains you make on your investment.
2006-10-24 05:55:10 · answer #6 · answered by Artguer 2 · 0⤊ 0⤋
I say a loan for this reason.. That loan can help you in many ways from increasing your credit to helping you to get cash for other things you want to do once you have enough cash from the other things you do then you can pay of the loan. Its a stepping stool not a crutch.
2006-10-24 06:07:41 · answer #7 · answered by shaundy1714 2 · 0⤊ 0⤋
There are some good tax breaks if you are buying a house. You can write off the percentage rate, If you take anything into say goodwill to donate it get a reciept for it because being a home owner you can write that off too. There are so many perks to owning a house. Any repairs that are done to the house can help you on your taxes. Here is a site you can go to and research it
http://www.bankrate.com/brm/itax/news/20030207a1.asp
Hopefully this will answer your questions.
2006-10-24 06:01:03 · answer #8 · answered by blondie21_97504 3 · 0⤊ 0⤋
I my opinion, you never want to pay interest just to get a tax break. You never come out ahead. If you are in the 25% bracket, paying $10,000 in interest saves you $2,500 in taxes. You are still out of pocket $7,500. There are other factors such as the anticipated mortgage interest rate versus what you make if you invested the cash but, in my opinion, if you can pay cash, pay cash.
2006-10-24 05:55:15 · answer #9 · answered by Wayne Z 7 · 0⤊ 0⤋
Cash is better. You get a tax break on the interest you pay on your mortgage. If you pay cash then you won't have interest to deduct on your taxes, but even with the tax breaks, you will still wind up paying more in interest than you will ever get back in tax breaks.
2006-10-24 05:55:34 · answer #10 · answered by Caitylane 2 · 0⤊ 1⤋