NerdWallet's Smart Money Podcast
Cash or Mortgage? Navigating Home Equity and Title Agency Shopping
Thu, 12 Dec 2024
Learn how to think about major homebuying decisions like shopping for title agencies, managing home equity, and when to buy a house with cash. How do you choose the right title agency for your home purchase? Should you buy a house outright with your savings or take on a mortgage? Hosts Sean Pyles and Sara Rathner discuss the pros and cons of these key housing decisions to help you make smarter choices. They’re joined by housing Nerd Kate Wood to demystify title agencies, offering tips on what they do, how much they cost, and why most buyers don’t shop around for them. Then, they discuss the risks and benefits of tapping into home equity or using savings to buy a house outright. They explore strategies for weighing mortgage options, the importance of maintaining an emergency fund, and balancing emotional and financial goals when purchasing a home. In their conversation, the Nerds discuss: how to choose a title agency, title agency costs, home buying tips, home equity pros and cons, buy a house with cash, 30-year vs 15-year mortgage, home buying process, choosing a mortgage lender, title insurance explained, cash-out refinance risks, second mortgage benefits, HELOC vs home equity loan, using savings to buy a house, renting vs buying a home, home maintenance costs, decision fatigue home buying, choosing a home inspector, refinancing a mortgage, landlord responsibilities, real estate investment risks, rental property tips, financial planning for homeowners, managing multiple mortgages, budgeting for home repairs, lender requirements for second homes, emergency fund for homeowners, homeownership costs, advantages of 30-year mortgages, housing market advice, personal finance for homeowners, home loan options, home equity risks, leveraging home equity, and financial planning for buying a house. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [email protected]. Like what you hear? Please leave us a review and tell a friend.
What do you need to know about choosing a title agency?
And in the case of having a mortgage, that would mean that this listener would be able to hold on to some of their savings and I don't know, maybe enjoy their life, go on vacation, fund the inevitable repairs that come with owning a home instead of having all of their cash tied up in a house. Okay, well, let's address the big question head on.
And since we do not give specific, personalized financial advice on this show, I'm going to turn the question over to you two, Sarah and Kate. Would you spend all of your savings to buy a house outright instead of maybe getting a 15-year mortgage? And why is the answer a resounding no?
So there are kind of like multiple reasons that it's a resounding no. And I would point out like, this isn't about, oh, that we're using cash to make this purchase. This is about the idea that you would be using all of your savings, that you'd be using all of your money.
So even if we're talking to folks who are getting a mortgage and they're just considering like, well, in order to afford the house I want and pay for the down payment, the closing costs, all the other things that come up, I'm going to be spending every single dime of my savings to do that. our general advice is like, don't do it, buddy.
Because there are, like Sean was just saying, there are so many things that come up when you buy a home, whether it's like unexpected repairs or just a billion trips to the home center because you need more painter's tape or like potting soil or just the expenses just mount and mount. And they might not be huge dollar amounts, but you need some kind of income to deal with them.
So really, whether you're talking about buying a house in cash, which if you can do it, that makes you a super competitive buyer, right? Or if you are saving up to buy a house with a mortgage, really our consistent advice is that you don't want every last dollar tied up in that because life happens, things happen.
Yeah, I cannot stress enough, not just how expensive it is to buy a home in the first place, but to maintain the home, to furnish the home. If you drain your savings just to get into that home, it's going to sit empty and broken until you rebuild your savings back up. And the listener does mention, well, if we don't have rent anymore, we can build our savings back up pretty quickly.
And I don't know what their full financial picture is, including income and other sources of funding that they have. But fundamentally, For, let's say, the average person, you're not going to be able to build your savings back up as quickly as you might think because there's always another crisis. And it's not just with your home, but also just your life.
There could be a medical crisis or something else that eats into your savings. Keep in mind that typically rent is the most you'll pay for your housing in a month, not including utilities, whereas a mortgage is typically the least you'll pay. Add on to the mortgage, the utilities, the maintenance, the repairs, even just the nice decorative stuff that you want to do. It's constant.
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