If I have enough cash to buy a home outright with enough to spare,should I?

Question

My experience with realestate :7 years of hell trying to make HUGE payments after the death of my spouse, and trying to raise two boys...arghhh. Yeah! Smart move, bought development property. I apexed....now I have wayyyy less than good credit.Example...I just got a cel phone, finally, and they only wanted 760.00 for a deposit if I buy my own phone.Get the picture, please I need qualified advice. Thanx

Answer 1

I do not have a cell phone and frankly do not want one. What a waste of money.

OK, now to your question. I do not know why you have bad credit if you have enough to pay cash for your home. That sounds really bazaar to me. If indeed you do have bad credit, you will not be able to get a reasonably low interest loan. (I may be wrong on that point, especially if you offer a large enough down payment) OK. Now let's assume that you give a 25% down payment and can acquire a 30 year fixed interest loan at 5.5% to 6%. That would be worth considering. Interest rates have not been that low for 35 years or more. So it would be worth maybe taking advantage of. And remember you get a tax deduction for the interest you pay on a home loan, knocking the effective rate down to about 4.5%.

On the other hand you will be paying a bunch of interest on that loan so you should have some plan for the cash that you did not use to buy that house. A real good plan. Not for example a HD TV set that fills up the south wall of that new house. It is always an excellent idea to have about 10k stashed away for emergencies for example. In t-bills paying 5%. The remainer should be suitably invested to yield an expected return of about 10%. Not guaranteed but expected.

PS. My house has been paid for for a long time. ha ha except for taxes and maintenance and insurance and utilities which never ends.

Answer 2

No. Invest that cash in something safe like T-bonds and make 5% tax free money. Get a loan for your house at 6% and you are only paying 1% on your loan if you use the t-bond money to pay it. So on a 100,000 dollar loan you are only coming up with 83 dollars per month average out of pocket. Then guess what? After the house is paid off in 15 or 30 years, you still have that original money you started with PLUS a house that is paid off. If you paid the house off up front, can you honestly say you would put away 800 dollars per month in savings? probably not...most people live at or beyond their means. If you go with the T-bonds, make sure they are 2 year so that when the interest rate gets up past 8% again you can reinvest it in the higher yeild bonds. You dont want to be stuck with a 5% bond for 20 years. When the interest rate does hit 8%, it pays your mortgage + gives you money left over. Plus interest on Treasury bonds is tax free and the interest you pay on your house is a tax write off, so you'll get a big fat tax return check every year. Hows that sound? :)

Answer 3

Jairee,

Go to an honest banker in your town and tell them your story. Tell them you want to rebuild your credit by having a small mortgage and ask how much you must put down to get the bank's best lending rate and lowest costs for a home purchase.

Get the offer and then go to Yahoo finance and check the rate the bank quotes you against the mortgage rate on Yahoo.

Good Luck,
Dana B. - President
www.thebarfieldgroup.com

P.S. If after you've done this you want someone to look at the offer, send me an e-mail and I will help you.

Answer 4

Offer and find out given that NONE of us recognize what they are going to or is not going to be given however i think you'll be turned down at 10K. I would no longer offer not up to 20K and even then doubt getting it. You present have to make feel so what do the comps look like for the discipline and a pair of or three miles surrounding the subject? Will you be shopping into an eventual slum field if the others do not move and go for subsequent to nothing? All matters your agent can aid you with.

Answer 5

Many banks offer "cash secured" loans. This may be a good option for you. You basically make payments to the loan, but the bank holds the funds to secure the loan. At the end of the loan, you still have your money, plus, it helps to establish good credit.

Answer 6

I would because it will save you a ton of money that would go to interest I pay 800 a month just in interest on a 120 thousand loan

Answer 7

I would. That would be a good asset base and minimize your living expense without a mortgage or rent payment. Go for it.