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Home purchase in cash in LCOL area vs financing

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  • #16
    Leverage is leverage.
    There is zero difference in buying a boat, car or house from a financial standpoint.
    The difference is in the future. Liquidity, utility, depreciation or loss of value.
    One tiny tweak in your plan. Cash equivalents like a wire transfer or a cashiers check is strongly suggested.

    Lordosis mentioned the logistics. The title company and seller might not appreciate it either. Call your bank 1 week prior if you insist on cash.
    Be prepared for your new neighbors, the bank, the real estate agent and the whole town shun you. “That’s the Doc that spent sixty hours counting singles and fell asleep and wanted to start over. Can you believe it?”

    Besides, who needs that many briefcases?

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    • #17
      I appreciate the input from White.Beard.Doc and EntrepreneurMD since you both seem to have "won the game" as we state around here. The goal is originally was for a 5 year payment plan off a 30 or 15 year fixed rate and the thought of paying for a house in cash has come more into my head as we keep looking for homes, not finding something we "must" have, seeing the down payment accumulation happening rather quickly, and not minding our current rental situation.

      Thanks all.

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      • #18
        If you go the 5 year repayment route which is absolutely fine (other than you have to pay closing costs and interest), you should probably do a 10 or 15 year fixed not 30. The 30 year is very heavily front loaded with interest, generally comes at a higher interest rate and you shouldn't need it's lower monthly payment since your plan is 5 year repayment.

        You're likely familiar with this concept. If not, plug in the numbers for a 15 and 30 year loan (at today's average rates for each) into an online mortgage calculator that breaks down monthly payments into principal and interest and you'll see the significantly higher percentage of the initial monthly payments going toward interest, not principal on the longer term loan.

        I say this because some have trouble understanding the concept that over 50% of their monthly payment initially can go towards interest even at a say a 3% 30-year, and almost no interest portion year 29.

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