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Buying A Home With Cash Versus Low Interest Rate Mortgages When deciding whether to buy a home with cash or to obtain a low-interest rate mortgage, there are several factors to consider. A cash offer can be very competitive in a real estate market, as it can give the buyer a significant advantage over buyers who need to obtain financing through a mortgage.

Here are additional advantages and disadvantages of both.

Advantages of buying a home with cash:

You own the property outright, which means no mortgage payments are necessary.
You may be able to negotiate a lower purchase price if you’re able to pay in cash.
You avoid interest charges and fees associated with a mortgage.

Disadvantages of buying a home with cash:

You may tie up a significant amount of your liquid assets in the property.
If you need cash for emergencies or investments, it may be difficult to access it if it’s all tied up in your home.
You may miss out on the opportunity to leverage your credit to earn a higher rate of return on your investments.

Advantages of obtaining a low-interest rate mortgage:

You can preserve your liquid assets for other investments or emergencies.
You may be able to earn a higher rate of return on your investments than the interest rate on your mortgage.
You can take advantage of tax benefits associated with mortgage interest deductions.

Disadvantages of obtaining a low-interest rate mortgage:

You will have to make regular mortgage payments, which may be a strain on your budget.
You may end up paying more with the interest charges over the life of the loan than if you had bought the home with cash.
You may be required to put down a larger down payment or pay mortgage insurance premiums.

The decision to buy a home with cash or obtain a low-interest rate mortgage depends on your personal financial situation and goals. If you have the cash available and want to own your home outright, buying with cash may be the right choice for you. However, if you prefer to preserve your liquid assets and have the ability to earn a higher rate of return on your investments, a low-interest rate mortgage may be the better option. It’s important to note, however, that a cash offer may not always be the most competitive offer in every situation. In some cases, a seller may be more interested in accepting a higher offer that is contingent on financing, rather than a lower cash offer. It depends on the specific circumstances of the sale and the preferences of the seller.

What's Ahead For Mortgage Rates This Week - May 1, 2023 Last week’s economic reporting included readings on home prices, sales of new homes, and pending home sales. Monthly and year-over-year readings for inflation were published along with weekly reports on mortgage rates and jobless claims.

February S&P Case-Shiller Housing Market Indices show slower home price growth

National home prices continued to rise in February, but at a slower pace according to S&P Case-Shiller home price indices. Month-to-month home prices rose by 0.40 percent in February and matched analysts’ expectations, but were lower than January’s reading of 2.50 percent home price growth.

S&P Case-Shiller’s 20-city home price index, which is frequently used by real estate professionals for tracking housing markets, rose by 0.10 percent month-to-month in February. This was the first time home prices rose in eight months.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, reported an increase of 0.50 percent in home prices for homes owned and sold by Fannie Mae and Freddie Mac.Properties owned and sold by Fannie Mae and Freddie Mac are subject to loan limits and underwriting rules used by the two agencies.

In related news, the National Association of Realtors® reported pending home sales fell by -5.20 percent in March compared to the expected reading of 0.50 percent growth and February’s reading of 0.80 percent in pending sales.

Mortgage Rates Mixed, Jobless Claims Fall

Freddie Mac reported mixed movement on mortgage rates as the average rate for 30-year fixed-rate mortgages rose by four basis points to 6.43 percent. Rates for 15-year fixed-rate mortgages fell by five basis points and averaged 5.71 percent.

Initial jobless claims fell to 230,000 claims compared to the expected reading of 246,000 claims and the previous week’s reading of 245,000 claims. Continuing jobless claims fell to 1.86 million filings from the prior week’s reading of 1.87 million ongoing claims.

The University of Michigan reported no change in consumer responses to its consumer sentiment survey for April. The index reading of 63.5 for March was unchanged in April and also matched analysts’ forecasts.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending, the Federal Open Market Committee’s scheduled statement, and Fed Chair Jerome Powell’s post-meeting press conference. Readings on public and private-sector employment and national unemployment are also scheduled for release.

Buying A Home With Cash Versus Low Interest Rate Mortgages

What’s Ahead For Mortgage Rates This Week – May 1, 2023

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