Small Cash Loans
Should we pay for a property in all cash or put a large down payment and get a small mortgage?
Hello,
My wife and I are looking at purchasing a town home or smaller home in the area of Tracy, CA. We are looking at homes in the 180 to 200k range. We can afford to pay cash in this price range, but we will only have about 50k in savings leftover if we do this. We don’t qualify for a low interest loan because we recently started a new business and don’t have a solid track record yet. We could qualify for a high interest FHA at about 9%. My thoughts are to pay all in cash, but my wife thinks we should do mostly in cash and get a small loan. I like the idea of having no mortgage, hence less overhead each month, and we’re not throwing away lots of money interest each month. My wife however doesn’t like the idea of having too little money leftover after we buy the home, just in case something happens. So, do you think we should pay all in cash or pay mostly in cash and get a loan for about 50k or so, and why do you feel that way? Thanks!
Pay cash for the house. You will avoid the application, loan origination and reconveyance and credit-pull fees, which could add up to almost 2%-4% of the loan amount.
Then, after you have moved in for a few months, apply for a HELOC from your bank.
Since you have 100% equity in the home, you will get the HELOC.
And the HELOC is usually free in application, and you pay interest only on the amount you take out. If you don’t use the money, you don’t pay any interest whatsoever.
This, to me, is the best way to go about this.