Buying a Second Home? Consider Cash

By Lee Cameron Published 09/8/2011 | Real Estate

In this struggling economy, there aren't many people out there jumping at the chance to buy an investment property. Most people in America are worried about keeping the home they already have and can't even consider the thought of buying a second home. But for the select few who are willing and able, there is a new trend emerging - buying with cash. According to recent stats, almost 60 percent of buyers who purchased investment homes did so with cash. In 2009, the number was 48 percent. Obviously cash is king right now!

There are a couple reasons for this popular move towards cash. The most obvious is that it's difficult to get a mortgage right now, especially on a second home. By bypassing the lender entirely, a buyer doesn't have to worry about meeting strict new loan rules and dealing with the hassle of mortgage brokers. Additionally, paying with cash will often lead to a smoother buying process. The tough economy makes everybody nervous during large transactions, often making buying a home a slow, tricky process in even the best circumstances. Providing cash means that the seller doesn't have to wait for banks and financing, and there are fewer people to deal with (and pay!) at the closing. This will always make the process smoother for everybody.

And then, of course, there's the best reason of all to buy a home with cash - no debt! Imagine being able to walk into your new home knowing that it is all paid for!

Then again, for many people it may not make good financial sense to pay cash. Mortgages may be tough to get at the moment, but rates are still lower than they've been in years. Though you may not relish the thought of the debt, you might be better off financially if you take advantage of the current rates. There's also the problem with liquidity. With the slow housing market right now, it may be some time before you can make your money back by putting the home back on the market. There are much more effective ways to invest your money right now than in the housing market. But the pleasure of being debt free in your house may be enough to erase these concerns. Just don't follow the trends, take a good look at your financial situation and listen to good advice from experts before deciding what would be best for you.