Part 2 of a 2-Part Series
Are you planning to buy or sell a home in 2015? Whether you are looking to purchase or sell a vacation home or a luxurious place you and your family can live year-round in the Lake Arrowhead area, our gift to you this year is help you keep your 2015 New Year’s Real Estate Resolutions.
In our last post, we examined resolutions for sellers. This week, we will conclude our two-part series by focusing on resolutions for buyers, who may find it tough to find just the right place unless their agent helps map out a strategy. Whether you plan on securing a mortgage or if you plan to pay cash for your luxury locale in Lake Arrowhead, our 2015 Real Estate Resolutions will help you make your move.
Paying Cash
If you can afford to avoid interest rates, work with your accountant to determine a working budget. According to Realtor.com, in the U.S., some 43 percent of homes in the U.S. were paid for by cash. In 2011, that figure was 30 percent. In 2008, that percentage was just 15. So there is definitely an upward trend for paying with cash. If you’re considering making a cash purchase on your next home, consider the perks:
- The most obvious benefit to paying cash for a home is that it eliminates the need to pay interest on the loan and also cuts many closing costs.
- As noted in Forbes, one of the best benefits of paying upfront is that you may qualify for a “liquidity” discount.
- Writing an offer for cash will give you an edge in a competitive market. If a house gets multiple offers, yours will stand out. As Investopedia notes, “a cash buyer’s home is not leveraged, which allows a homeowner to sell the house more easily – even at a loss – regardless of market conditions.”
Despite all of the above, a home without a mortgage is a house without a major tax write-off. So this may be your number one reason to finance. But if you still can’t decide whether to pay cash, evaluate your personal circumstances. And make sure you have enough cash reserves to cover these possibilities, including having funds set aside for retirement, at least six months of emergency funds in a savings account and sufficient health, life and disability insurance
Financing
It just may make more sense to use your cash to pay off non-deductible credit obligations than to put cash into a home.
If you’ve decided against paying cash, your first order of business will be to figure out financing. It will be well worth your time to get pre-approved. Speak to a licensed mortgage professional before you start looking at homes. An experienced real estate agent will be able to connect you to a reputable loan officer, who will check your credit and pre-qualify you for a mortgage. It’s vital to take this step before your house-hunt because it’s possible your credit report has errors. These should be addressed before you apply for credit, to ensue you get a favorable interest rate. Also, consider these benefits to financing a home:
- Tax deductions. When it comes to buying a vacation home, one of the most obvious benefits to securing a mortgage is the tax write-off. This does not just refer to interest and taxes but also points and closing costs.
- Although losing the mortgage interest deduction can make a cash purchase unappealing, according to BankingMyWay, until you realize this deduction may not be as valuable as it seems. So check with your accountant.
- The key investment issue may be whether you could earn more by investing the cash in another way. The “return” on cash put into the home equals the mortgage rate you’d pay if you borrowed instead, since it relieves you of that interest cost. Paying cash today, for example, would save you the 4.167% you’d pay on the average mortgage.
- More options. You may be able to improve the location and/or condition of your second home by securing financing for it instead of solely relying on cash reserves.
The best advice when considering which option makes the most sense is to opt for whichever choice gives you more bang for the buck. Also, ask yourself which will provide the greater return on your investment. Whether you are buying a first or second home or investing, real estate can be tricky—whether you are buying your first home, purchasing a vacation home, or upgrading from a starter. If you are interested in buying or selling property in Lake Arrowhead, California or the surrounding area, don’t get caught in a Catch 22 — owning two homes or none at all. The Prime Team is the only group of real estate agents in the Lake Arrowhead area who stand by our services by offering a number of guaranteed sales and purchasing programs. So don’t miss a prime opportunity to take advantage of today’s market. We’ll answer all of your questions today, and you’re never under any obligation. Call 1-909-337-7653 and ask for a member of the Prime Team.
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