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Question: If you're buying a house, is it better to take out a loan or pay cash?Home » cash loan
Question : If you're buying a house, is it better to take out a loan or pay cash?
I've heard that there are good tax breaks if you have a mortage. Do they offset the interest that you'd be paying when you take out a loan? Which is better, cash or loan?
- asked by RD
All Answers:
Answer #1
If you have cash then you should pay cash. Nomatter what the tax breaks are, you aren't payinginterest on the loan.
- answered by Amanda SSS
Answer #2
The way you should look at it is like aninvestment. If you get an mortgage you have tocalculate your interest. Now if you pay cash youhave to compare if the interest you could earnafter taxes is more than the cost of interest onyour mortgage. Usually it is better to pay offyour house, then borrow against it and invest. Thecost of interest is tax deductible against anygains you make on your investment.
- answered by Artguer
Answer #3
I my opinion, you never want to pay interest justto get a tax break. You never come out ahead. Ifyou are in the 25% bracket, paying $10,000 ininterest saves you $2,500 in taxes. You are stillout of pocket $7,500. There are other factorssuch as the anticipated mortgage interest rateversus what you make if you invested the cash but,in my opinion, if you can pay cash, pay cash.
- answered by Wayne Z
Answer #4
Cash is better. You get a tax break on theinterest you pay on your mortgage. If you paycash then you won't have interest to deduct onyour taxes, but even with the tax breaks, you willstill wind up paying more in interest than youwill ever get back in tax breaks.
- answered by cathalane
Answer #5
There are some good tax breaks if you are buying ahouse. You can write off the percentage rate, Ifyou take anything into say goodwill to donate itget a reciept for it because being a home owneryou can write that off too. There are so manyperks to owning a house. Any repairs that are doneto the house can help you on your taxes. Here is asite you can go to and researchit
http://www.bankrate.com/brm/itax/news/20030207a1.aspHopefully this will answer your questions.
- answered by blondie21_97504
Answer #6
Well, the answer depends on what you are going todo with the cash if you don't put it all into thehouse. It also depends on your age and if you areclose to retirement. Most of us don't have theoption of paying cash so we get a mortgage andmake the payments out of our income. Then themortgage interest that we pay can be used as a taxdeduction to reduce our income and thus reducetaxes. Also, if you have enough money to pay cashfor the house you have to consider that mortgageinterest rates are very low right now. So if youare a savvy investor you could take out a mortgagepaying only around 6 1/2 percent interest, theninvest the cash and over the long run you shouldcome out ahead, especially if you are in amoderately high income tax bracket and can deductthe interest expenses. Please realize that this isa very generalized answer and that only afinancial adviser who knows ALL the factsregarding your specific situation can give youpersonal advice. So you really need to consult aprofessional before you act on this matter.
- answered by astrosfan57
Answer #7
put 35% down on the home and finance the rest. Keep your loan conforming and when your at 65%Loan to Value your getting a great rate. Don'ttie up your money, start a business with it andmake it multiply. Let me know if i can be of anyassistance with the financing.
- answered by ondreforsure
Answer #8
I say a loan for this reason.. That loan can helpyou in many ways from increasing your credit tohelping you to get cash for other things you wantto do once you have enough cash from the otherthings you do then you can pay of the loan. Its astepping stool not a crutch.
- answered by shaundy1714
Answer #9
Loan is better but if you want to keep thepayments down offer a larger deposit. You will gettax breaks and many times interest can be writtenoff. Also if depends on whether this is yourprimary home or second. Second homes can have manywrite offs.The other draw back to putting all cashin is if you decide to sell it. It forces you toeither get full cash out or carry paper. And youwould have to get a very large deposit and mostcan not get that much cash to buy a home. Youlimit who can buy your home.I like to save my cashand use it for other investments. Make the cashwork for you. When it is just sitting in your homeit is not making you money. I use the cash to buymore Real estate to rent out or flip.Talk to youraccountant.
- answered by Nevada Pokerqueen
Answer #10
read tips on real estate, loans and mortgages tohelp you more on this site
- answered by lushy
Answer #11
As many others said, the tax break will not equalthe interest paid, so that alone is not enoughreason to get a mortgage. (Note - even if theyexactly equalled each other, you'd be letting thegovernment hold the money interest free for a yearuntil you got your refund, so that doesn't makesense.)However, it depends on what you want to dowith the money if you do finance your house. Youwould need to calculate the actual cost ofinterest (total interest paid minus tax relief)and compare that to the expected return on theinvestment you would make with that money todetermine which is higher / better for you. Afinancial advisor could help you look at someinvestment options (and their risks) to make thatdetermination. Check with friends to see ifanyone can recommend a good advisor.
- answered by cmc1217
Answer #12
If you can pay cash, than cash isbetter....Remember, you won't have a mortgage andyou will OWN your home, if you get into financialtrouble, you won't worry about losing yourhome...I paid cash for my home and it has made mylife so much easier and stress free!
- answered by angela R
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