Hello, LOs!
Today is the day. After 25 years in the suburbs of New Jersey, my parents are leaving for North Carolina.
I'm happy for them. The community they called home made a ton of sense when they had kids in the school district and needed to commute into New York City. But today, as empty-nesters who work from home and are approaching retirement, it just doesn't make fiscal sense anymore. They can enter the next phase of their lives in North Carolina and not have to worry about the cost burdens of the NYC metro area.
Here's what I find intriguing about their real estate story. They'll have sold their home in New Jersey for $640,000 and will buy a new home in the suburbs of Raleigh for about $420,000. Following the sale, they'll be able to pay for the new house in cash. But because of the timing of closings (a day apart), they want to have a mortgage as a backup option. I think that's sensible.
Their LO at JPMorgan Chase – whom they like quite a bit – is happy to accommodate. Of course, he's also trying to sell them on just sticking with a mortgage (they've been pre-approved). After all, they'd have a loan under 3%, monthly payments would be low, and they could invest the cash into higher-yield products. Obtaining a mortgage would give them both liquidity and flexibility into retirement (they could always pay it off early, too).
They're intrigued, but there's something psychologically satisfying for them about not having a mortgage, not having to worry about making payments on the house, even if it limits their cash-flow.
Personally, I agree with their LO. I think it's a better financial decision to take a mortgage at below 3% and invest the cash. But it's not my decision, and I think they'll end up being cash buyers.
So, LOs, lemme ask – how often does this sort of thing happen to you? Clients who could pay cash on a new home but might be swayed to get a mortgage? A new report from Redfin found that cash deals comprise nearly one-third of new homes sales these days. Write to me anonymously at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
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