Buying house with cash

[Anonymous]

Under what circumstances does it make sense to buy a house with cash (no mortgage)? How would you decide, assuming you have the cash to afford the house?

[Anonymous]

It can make sense anytime if you have the cash and go through the same due diligence.

[Anonymous]

Mortgage rates make a huge difference. At 3 percent it’s not a terrible idea because you keep more of your money and get the tax benefits. At current rates you’re paying so much to borrow the money, you’d make more in an investment account.

[Anonymous]

Anonymous wrote:Mortgage rates make a huge difference. At 3 percent it’s not a terrible idea because you keep more of your money and get the tax benefits. At current rates you’re paying so much to borrow the money, you’d make more in an investment account.

Do I understand correctly that at the current (high) mortgage rates, it makes sense to pay cash vs at the lower mortgage rates, borrowing would make sense? The mortgage deduction and the SALT cap would roughly be the same as the standard deduction, so the tax advantage of carrying a mortgage is less of an incentive now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Mortgage rates make a huge difference. At 3 percent it’s not a terrible idea because you keep more of your money and get the tax benefits. At current rates you’re paying so much to borrow the money, you’d make more in an investment account.

Do I understand correctly that at the current (high) mortgage rates, it makes sense to pay cash vs at the lower mortgage rates, borrowing would make sense? The mortgage deduction and the SALT cap would roughly be the same as the standard deduction, so the tax advantage of carrying a mortgage is less of an incentive now.

NP. I would agree with that.

We paid off our mortgage about 12 years ago. If/when we move, we’ll probably buy with cash. (Although I may not want to sell brokerage assets with cap gains liabilities to cover the difference assuming we buy a more expensive house, so maybe we’d get a small mortgage and accelerate the payoff)

[Anonymous]

If it's a hot market and having an all cash offer allows you to waive the financing contingency and beat out other offers which require a mortgage.

[Anonymous]

Anonymous wrote:If it's a hot market and having an all cash offer allows you to waive the financing contingency and beat out other offers which require a mortgage.

This.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If it's a hot market and having an all cash offer allows you to waive the financing contingency and beat out other offers which require a mortgage.

This.

Right, but you can do this and still get a mortgage.

[Anonymous]

We made an all-cash offer on our house because we needed to act very quickly to get the house and we weren't pre-approved and we knew it was going to be very competitive to get the house. Our offer was accepted and we ended up getting the mortgage before closing and it was fine. We could have and would have paid all cash if we had had to do so, but it would have cleared us out of cash.

[Anonymous]

Anonymous wrote:Mortgage rates make a huge difference. At 3 percent it’s not a terrible idea because you keep more of your money and get the tax benefits. At current rates you’re paying so much to borrow the money, you’d make more in an investment account.

+1

I have done this many times.

If rates are 3% or under we pay cash.

[Anonymous]

OPPS I wrote that backwards
3% or under we mortage over 3% we pay cash

[Anonymous]

Because you are rich and don't need a mortgage. That's the most common answer. People who advocate for getting a mortgage to leverage low interest rates are not rich. They are still trying to become rich.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Mortgage rates make a huge difference. At 3 percent it’s not a terrible idea because you keep more of your money and get the tax benefits. At current rates you’re paying so much to borrow the money, you’d make more in an investment account.

Do I understand correctly that at the current (high) mortgage rates, it makes sense to pay cash vs at the lower mortgage rates, borrowing would make sense? The mortgage deduction and the SALT cap would roughly be the same as the standard deduction, so the tax advantage of carrying a mortgage is less of an incentive now.

I don't understand this point. The SALT cap and mortgage deduction are separate benefits if you itemize. The SALT cap is now $40,000 and then you can deduct mortgage interest on top of that if you max out the SALT, while the standard deduction is $31,500 for a married couple.

[Anonymous]

Anonymous wrote:If it's a hot market and having an all cash offer allows you to waive the financing contingency and beat out other offers which require a mortgage.

Correct, or you can say get a 5% cheaper price because you have no mortgage contingency. Nothing stops you from buying the home and then getting a mortgage after you own it.

[Anonymous]

For anyone who buys with cash, where do you get it from? From savings in your regular bank accounts or you take out from brokerage accounts or stocks?