Why Buy with Cash, Then Get a Mortgage

No matter your circumstance, there are at least a couple of good reasons to purchase a Boston property entirely with cash:

  1. an all-cash offer can afford you a critical edge if you’re competing with strong offers from other buyers
  2. with sought-after neighborhoods, resilient markets, and strong rents, Boston area real estate can be a solid place to invest your money

That said, sometimes it makes sense to hold onto cash to spend or invest elsewhere such as gold bars Brisbane. You can do both if you think flexibly about how you make your investment.

Buy with cash, then “refinance”

You might decide, then, to purchase up front with cash for a competitive, quicker closing and get a mortgage after you own the place. You would do a “refinance” based on the equity that’s in the home. Assuming that it appraises for what you paid in cash, you could get a mortgage based on the full purchase value.

With historically low interest rates (well below 5% since 2012) and a wide array of financing products for borrowers with solid income and high assets, this approach could well be the fit for you.

Consider this scenario

In the summer of 2013―during the height of that year’s buyer competition—one of my buyers was relocating from out of state and needed to secure a home in time to start an academic position in the fall.

With limited opportunities to get to Boston for open houses, she needed a quick plan for buying a home in a community that suited her needs. And it needed to be a competition-proof plan: the first property we saw together had nearly 20 offers within hours of that first open house.

The strategy

Part of our multilayered strategy for winning quickly was to purchase with cash (along with other enticements for the seller). Though this buyer didn’t readily have cash on hand of her own, she did have access to a family trust fund. Deep brainstorming in our buyer meeting brought that to the forefront as a tool we could use.

We decided to have her borrow the purchase money from the fund, which she would immediately repay after closing by taking out a mortgage based on the closing price.

The result

We did just that. Her cash purchase allowed her to close without coming to town. The day after closing, I met an appraiser at the property to get her loan process moving. When her loan closed a couple of weeks later, she paid back the trust fund and had a manageable mortgage for her new home.

We were able to satisfy all her needs by thinking flexibly―and capably―about both cash and financing.