The Pros and Cons To Home Buying With Cash | Delray Beach Real Estate

pros and cons tobuying with cash in delray

During the post-COVID flight to Florida, the market was flooded with wealthy cash buyers ready to outbid anyone for homes that, in many cases, doubled in value. This in turn further inflated the value of these homes, thanks in large part to the timeless principle of supply and demand. Today, following intervention from the Federal Reserve, home prices are flattening and the market is adjusting. The slowdown has led to the Real Estate and Mortgage industries reevaluating the strategies they suggest for their clients. One of these is discussing the ramifications of buying a Delray Beach home with cash. It's much more than a cash flow versus interest paid situation and can change depending on the circumstances in your life. Read on to learn about the pros and cons to home buying with cash in today's Delray Beach Real Estate blog! 

0% interest

Pro: You Pay No Interest

With sky-high interest rates, home buyers are as hesitant as ever to take out new mortgages in such uncertain times. A  nonexistent mortgage payment is the most immediate benefit to home buying with cash. All of your money goes to the principal, and you don't have to do anything with a lender or third-party financial institution.

shifts leverage to you

Pro: Shifts The Leverage To You

Cash is king, and when you show up with the funds in hand to purchase the home outright, there is little the seller can do to dispute your leverage. The seller can always choose a different buyer for a myriad of reasons, be they financial or personal, but on paper, your cash in hand immediately indicates your financial solvency. In many cases, the majority of time spent during a real estate transaction is dedicated to evaluating the financial capabilities of both parties. When time is of the essence, cash is an even more invaluable resource. 

closing costs

Pro: Save On Closing Costs

There are several closing costs that cash buyers can avoid by virtue of paying directly. Several closing costs are exclusive to the buyer's need to obtain a loan. These include but aren't limited to:

  • Loan origination fee
  • Credit reporting
  • Mortgage insurance
  • Courier fees
  • Application fees
  • Escrow fees

spend cash elsewhere

Con: You May Want To Use The Cash Elsewhere

You may have the cash to buy the entire home at once, but spending $400,000 on a home is a far cry from putting $80,000 down for a mortgage and keeping $320,000 for something else. You could be addressing other debts, making a large purchase, or leveraging to upgrade the home you just took a loan for. Savvy home buyers could also consider investing the remaining cash and making their money work for them whilst paying down the home diligently. Imagine your life with the burden of a mortgage compared to the liquidity of cash reserves, and judge accordingly.

significant liquidity

Con: Requires Significant Liquidity 

Home prices have skyrocketed in recent years and despite federal intervention to plateau rising costs, have remained very high. In order to afford a home in Delray Beach, a home buyer must already have a substantial cash reserve to put a down payment on one of these valued homes. The starting point for someone who isn't already extremely wealthy is high enough, but buying a home outright is a far more impactful blow to your liquid funds. Think carefully about what you envision yourself doing in the near future. If you buy a home outright, you'll immediately obtain a powerful hard asset and a new living space for you and your family. If you choose a mortgage, you maintain the financial flexibility to make significant decisions going forward.

For more about the nuances of homeownership in Delray Beach - see below...

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