Going into debt is always a bad idea if you can avoid it (we often hear), but sometimes it makes good financial sense to finance a large purchase. Buying with cash and financing both have their pros and cons, especially when it comes to real estate – which often makes it a tough dilemma to resolve. So, buying a home with cash vs. financing in Los Angeles – which is better? If you’re about to buy a home, you need an answer to that question, not a non-committal, “It depends.” Let’s see, then, which way has the most pros, and let’s begin with the financing option.
Financing a Home in Los Angeles Pros
Financing, instead of buying a home with cash in Los Angeles, carries several significant benefits. Perhaps most important of these is the fact that when you finance, you get to hang on to most of your cash. So if you need to make repairs or renovations or make a down payment when it’s time to buy a new home, you will have the money on hand to do so because you’ll still have plenty of liquidity. In addition, financing your home will improve your credit score, and you’ll still have cash available to pursue investing opportunities.
Financing also has certain tax benefits that buying a home with cash in Los Angeles doesn’t. For example, with financing, you can deduct your mortgage interest and the cost of some improvements. Also, financing will allow you to take the homestead exemption, which in some states provides a huge amount of protection from creditors.
Buying a Home with Cash in Los Angeles Pros
Now, let’s examine the many pros of buying a home with cash in Los Angeles, such as:
FASTER WITH LESS HASSLE
Buying with cash means, obviously, that you won’t be going through a lender, so you won’t have to fill out a bunch of loan-application forms and then wait around for loan approval and processing. You also won’t have to worry about your credit score. And closing with a cash purchase is usually a lot faster because there are far fewer parties involved.
When you buy with cash, the home is all yours on signing the papers and handing over the money. This means that it isn’t co-owned by you and the bank, and it’s fully paid for. So you immediately have the full equity of the home’s worth available if you should need it to secure financing for other purchases or investments. An equity line of credit can be a lifesaver sometimes.
NO MORTGAGE PAYMENTS
Buying a home with cash in Los Angeles can also provide you with a great deal of peace of mind – simply because you won’t have to worry about making that mortgage payment every month for the next 15 to 30 years. The only expenses you will have are the inevitable property taxes, insurance, and occasional repairs.
NO MORTGAGE COSTS AND LOWER CLOSING COSTS
Another pro of buying with cash is that you’ll save the thousands of dollars you would otherwise have to pay in loan origination fees and processing fees and for mortgage insurance. You’ll also save the many more thousands of dollars you’d pay in interest over the years. And the icing on the cake is that closing costs will be much lower with a cash deal.
Finally, buying a home with cash in Los Angeles gives you buying leverage. When you have cash in hand – and show it to the seller – your offer immediately becomes more attractive. Paying cash is an easy way to win a bidding war.
So which way is indeed better: it depends on your situation! No matter which way you choose to buy, we are here to help!