It’s common to hear the term “all-cash buyer” during real estate shows. It’s often used as a way to sweeten a deal, but what’s the reality? You can buy a house in Albuquerque with cash or with a mortgage, and each has its own pros and cons.
Buying a House with Cash Is Increasingly Uncommon
You’re in the minority if you’re able to buy a house with cash. Considering the median home sale price is in the mid-300,000s, most people cannot afford it. In 2020, the National Association of Realtors’ Profile of Home Buyers and Sellers estimates that around 87% of home buyers finance their purchase.
There is no requirement that you show up with a suitcase full of cash if you have enough savings to buy a home outright.
What it means is that you’re not getting a loan. The money may come from savings, the sale of another property, or the use of investments.
The Upsides of Paying Cash
If you can pay cash for a home, there are undoubtedly some benefits, including:
- Sellers find you more attractive as a buyer. Right now, this is a big deal. Albuquerque has a limited inventory of homes and a high demand for them. Bidding wars are inevitable. When making an offer, paying cash can help you be more competitive. That’s preferable to sellers because then they don’t have to worry about what happens if your mortgage financing falls through. A cash-only transaction is also usually faster, so you can get to the closing quicker, which sellers tend to like.
- You don’t have to worry about mortgage payments when you buy a house in cash, but you also won’t be paying the interest and fees associated with a home loan.
- Albuquerque home buyers who pay cash have lower closing costs because they aren’t paying fees associated with mortgages like lender fees.
- It’s not just the seller who benefits from a faster closing. It’s advantageous for the buyer as well. You might be able to close on a home within a week of your offer being accepted. If you buy with a mortgage, it can take a month or more.
- Once you close, the home really is yours. You don’t have the fear of not being able to make the payments and subsequently losing your home.
The Downsides of Paying Cash
There are a few cons of paying cash for a home that you do have to think about as well.
- There is no liquid money in your account. Your cash won’t be easy to access if you use it all to buy a house.
- If you invest your money in something other than a house, you could make better returns.
- The mortgage tax deduction will not be available to you. Your taxable income goes down when you itemize deductions for the first $750,000 of mortgage interest.
Talk to a financial professional before buying a house in cash if you’re weighing the option. You can discuss all the different scenarios and how that choice could affect you.
Of course, if you’d still have money in savings or investments after buying a house with cash, then it might make the decision easier.
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