To Finance or Not To Finance… That is the question a number of our potential home buyers are asking themselves these days. And it’s a great question indeed!
Of course, from a paperwork perspective, paying cash for a home is less of a hassle. There are no pre-approvals needed, no interest rates to negotiate, no underwriters to please, and your timeframe to close on the property can be much shorter.
Money Is Cheap
But, “money is cheap,” is what I hear my customers repeat as we chat about their specific buying situation. So, what do I recommend to them? Speak to your financial advisor or one of our local banks, of course!
Actually, I ask that you speak to both. Your financial advisor can help you understand where your money is currently invested, and what you have to spend, while our local lenders can help you find the specific loan program that’s best for your unique situation. Oftentimes there are programs out there that you had no idea existed, and our local lending specialists are very knowledgable with buying vacation homes, second homes, or full-time island residences.
Advice From Our Local Lenders
We have two local banks here on the islands, Sanibel Captiva Community Bank, and Bank of the Islands – and we love them both! In fact, David Wright, with Sanibel Captiva Community Bank provided some insight on the question “Should I just pay cash?”
David explains, “If you can pay cash for a home you likely have a financial advisor, ask them if you should pull your money out of equities and purchase a home that may appreciate 5% or so annually. When they are done exhaling, I expect they will patiently and politely explain why you need to leave your money right where it sits.”
He goes on to explain that mortgage interest rates are still near historical lows. “After one considers the rate of inflation, and the tax deductibility of the first $1,000,000 in borrowing, the real cost of borrowing may be 1 – 2%.”
He sums up his statement with, “Cash is king. Why send a king to do a bankers job?” – See why we love David and our very personable local lenders?
Of course this doesn’t mean financing is best for every situation. Again, I encourage you to talk to both your financial advisor, our local banks, and even your national bank if you’d like. The more information you have, the better decision you can make about buying cash vs. financing portion of your island home purchase.
Don’t hesitate to reach out to us for more information on our local lenders!