When purchasing a luxury home, you may be tempted to purchase the property with cash. After all, there are some benefits to paying cash instead of taking out a mortgage loan when purchasing real estate. To determine if this is truly the best route for you, however, it is important to consider both the pros and cons of purchasing a home with cash.
Pro #1: Negotiating Power
Perhaps the greatest benefit to purchasing a home with cash is the fact that it gives you negotiating power. After all, if someone else puts in an offer that is contingent upon being approved for a loan, the buyer is more likely to favor your offer if you are planning to pay in cash. You may even be able to negotiate a much lower price simply because the seller knows he will have the cash in hand far more quickly.
Con #1: Purchase Protection
Despite the fact that the economy is regaining strength, there is always the possibility that the property you are purchasing will drop in value. When you take out a mortgage loan, the lender takes the loss for this value change. When you pay for the property with cash, on the other hand, you assume the cost associated with a drop in value.
Pro #2: Avoid Credit Problems
If you have problems with your credit, paying cash is a great way to work around it. After all, no one needs to check into your credit history if you are paying cash. If privacy is essential to you, paying cash will also help to ensure fewer people are digging around in your personal and financial affairs.
Con #2: Determining Value
When you take out a mortgage loan, the lender examines the property to ensure you are not paying too much. If you choose to pay in cash, you do not automatically have a third party to help you determine if you are making a wise investment. Therefore, if you do choose to pay with cash, you should hire an expert to evaluate the value of the property before you make an offer.
Pro #3: Pride, Satisfaction and Convenience
There is no doubt about the fact that paying for a home with cash can instill a certain sense of pride. After all, you must be doing quite well for yourself if you can afford to purchase a luxury home with cash. Furthermore, owning a home outright can feel quite satisfying and reassuring because it means you have 100 percent equity in the home. This means the home will be available to borrow against if you do need to borrow money in the future. Of course, paying cash for a home also means that you do not have to worry about making a mortgage payment each month, which means there is one less thing for you to worry about as you handle your financial affairs.
Con #3: Tying Up Your Cash
While paying cash for a home may be convenient in many ways, it also ties up your cash flow and prevents you from being able to use it in other ways. You may be saving money on interest since you did not take out a loan, but a wise investment will create more money in interest than you are saving by paying for your home outright. In other words, you are missing out on opportunities to have your money work for you when you use it to pay for a home in cash. You are also reducing the amount of cash that is available for unexpected emergencies, college funds and other situations that may require a loser cash flow.
Whether you are interested in paying cash or taking out a mortgage loan, our team of luxury real estate agents can help you find the best properties Southern California has to offer. Contact us to learn more about the most exclusive neighborhoods and luxurious homes in Los Angeles or surrounding areas.
Look into these properties listed below priced from $6 Million to $10 Million.
$8,200,000 : 1200 CLUB VIEW Drive #600, Los Angeles3 beds, 4 baths
$6,595,000 : 12020 CHALON Road, Los Angeles5 beds, 7 baths
$8,900,000 : 524 N TIGERTAIL Road, Los Angeles6 beds, 8 baths
$7,995,000 : 333 S WINDSOR, Los Angeles6 beds, 9 baths
$6,495,000 : 227 S WOODBURN Drive, Los Angeles5 beds, 8 baths
See all City of Los Angeles Luxury Homes For Sale.
(all data current as of 8/17/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.