Just because you can afford to pay cash for your retirement home doesn’t mean you should. Click through to get a list of things to consider if you’re thinking of buying your retirement home without getting a mortgage.
Maybe you’ve just sold your home and you’re ready to buy your retirement home. Or perhaps you’re purchasing a second home where you’ll eventually retire.
Either way, you have enough money to pay for your retirement home in cash. But should you?
Here are few issues to consider:
You’ll tie up your liquid assets.
Paying cash for a home ties up a large lump sum in one place (until you sell the property). Will you have enough cash on hand to cover your retirement, emergencies and the monthly and annual expenses for your new home?
Will you want cash to pay for your children’s future expenses, including advanced degrees, weddings or the downpayment on their first home? Will any older relatives need help paying for their living costs?
You may be able to get a deal.
Paying in cash can give you the leverage to bargain and move your purchase offer to the front of the line.
Sellers like cash offers because they don’t have to worry about you getting approved by a lender for a loan. Since the seller is benefiting from your cash payment, you can ask for items that will benefit you, such as home repairs, a home warranty or seller contributions toward your closing costs.
You don’t have to go through the hassle of getting a mortgage.
When you pay in cash, you don’t have to endure the sometimes aggravating and time-consuming process of securing a mortgage. A hundred things can arise during the lending process that will lead to you not getting a loan.
You’ll miss out on the financial benefits of a mortgage.
It may not seem like those monthly payments will do you any good. But making timely mortgages can help boost your credit score. If you’ve used the mortgage interest deduction to reduce your federal income tax bill, you’ll lose that benefit when you pay cash for your retirement home.
You won’t have mortgage payments.
Enough said. It’s hard to complain about not having to deal with that hefty monthly bill for 15 or 30 years. And if your financial situation changes, you won’t have a monthly mortgage payment hanging over your head.
You’ll own your place.
Owning your home free and clear can be mentally liberating.
Still unsure whether to pay cash or use a mortgage to purchase your retirement home? Contact me and we can discuss it further.
Bruce Webb is a Senior Real Estate Specialist (SRES) and has an extensive network of senior related referrals.