Read This Before You Blow Your Whole Lump Sum On A New Home

Did you just get a lump sum of money? Perhaps you won the lottery, received money from a lawsuit, or inherited it from an estate. You may have been told that it is best to buy your "big ticket" items in cash because you will save money on interest. While this is true, there are a number of things that some people in your situation fail to realize. The following are a few things to keep in mind prior to purchasing your home in cash.

Will there be money left over after your purchase?

Perhaps you have enough money to buy the home, but if you are going to spend the bulk of the money on the home itself, you may incur other expenses in the near future and not be able to afford them. For example, as a homeowner, you will need to ensure you have money available for unexpected home repairs. You will also have to pay property taxes each year. Some people pay cash for their big homes and end up realizing that the leftover money is not enough to furnish their homes.

Why is it better to finance instead of investing all of your money on your home?

If there will not be any money left or a low sum after the purchase, you should strongly consider the benefits of making a large down payment. This will allow you to have some liquid assets available if needed. It will also likely mean that you will have low monthly payments, which is ideal if you are also trying to pay in cash because you are fearful of high mortgage payments. 

Can you get a competitive interest rate?

Perhaps you are thinking that your interest will be higher than other people. You may not have perfect credit, but you likely can still acquire a good mortgage rate because you have access to something that many people do not have, which is a significant amount of money to put down on the home. Being able to put down a larger down payment on a home can affect the interest rate extended to you, and the lower the interest rate, the less you end up paying in the long run.

Will you continue to work or have other taxable income?

This is important because you will legally have to file your income taxes. You may be eligible for tax deductions for the mortgage interest you pay each year for the home. 

A mortgage broker, like Premium Mortgage Corp, is a good resource to use to better understand reasons why financing your home can be more ideal. They can review your circumstances and help you locate a competitive rate.