Have a Cash Lump Sum? Tailor Your Home Financing Plans

Do you have a large amount of cash from your prior home sale or some other savings? Then you're in a somewhat unique position and can tailor the way you purchase your new home. While most Americans finance their homes as fully as possible because they must, you have the option of deciding what works best financially.

What options might help you the most? To assist you in finding your personalized mortgage plan, discover a few strategies you might want to consider and why.

Decide How Much Cash to Hold

First, consider how much cash you want to keep liquid for other uses. When paying for a house, you don't have to take an all-or-nothing approach - either paying all cash or getting a large mortgage. A mix-and-match approach between cash and financing keeps your budget strong while minimizing inconvenience.

Many Americans don't have enough to cover emergencies, natural disasters, medical crises, or other unexpected problems. If you're in this position, begin by reserving a significant amount of cash on hand to ensure you remain financially stable. How much you need depends on your own personal finances and sources of income.

If financial stability isn't a concern, brainstorm what you would use this money for if a home purchase were not a factor. Would you return to school, start a business, boost retirement planning, or invest more? How much would these activities require? This helps you decide what to hold back in a liquid form and what - if any - you want to tie up in your new house.

Tailor Your Mortgage

Once you have an idea how much cash to keep out, how should you approach the mortgage itself? You have many options, depending on your goals.

You could choose to put a large amount of down payment on the home, for instance, and split the difference between liquid cash and interest savings. This also allows you to take advantage of mortgage options with different rules, such as private lenders or jumbo loans. But you aren't obligated to use all your cash on hand and can choose just the right dollar amount to put down.

You might also consider customizing the term length of your mortgage. Want to retire in 15 years? Opt for a 15-year mortgage instead of a traditional 30-year term. You could then finance less money to keep payments affordable and assist with other retirement planning. Or, you might take advantage of the benefits of a shorter-term adjustable-rate mortgage and use your lump sum to pay any balloon payments.

Another option is to use the money you have in cash to pay the monthly mortgage payments on a standard mortgage. This frees you from being burdened by monthly mortgage payments but keeps the bulk of your funds open during the mortgage term. While your lump sum is reduced a little each month, this method stretches out its benefit for many years overall. Set it up automatically for the most convenience.

Start With a Consultation

Before you make such a big financial decision as to what strategy you wish to use for your mortgage, start by learning more about loan options available to you and how your cash reserves might adjust them. Today's homebuyers, especially those with a lump sum to include, have more choices than ever before.

Cornerstone Residential Mortgage can help. We offer a wide variety of mortgage loans with different interest rates, fees, terms, and payments. Our dedicated team of financing professionals will help you choose one that works to your benefit, no matter how you want to use your lump sum. Call today to get started.