Do the brokerage statements have to show an enough cash amount or can they show enough liquid assets other than cash?
I donāt really understand the question. If you have the cash and donāt want a mortgage, of course you should pay cash.
Would I recommend it? Yes, but itās very specific to oneās individual situation.
If you need to show proof of funds, bank statements, brokerage statements, etc. can all be used.
Just one example, we paid cash for our current house because it was in a half finished state and wasnāt eligible for conventional financing.
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I wonder, I might not pay cash if I were to be taxed on capital gains or taking a distribution from a 401k retirement account, or having penalties on cashing in CDs.
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This. We paid cash for our current house, our cabin, and half of my motherās house (bought jointly with my brother). The proceeds from the sale of the house we raised our son in paid for all of the subsequent properties. Part of our retirement planning was zero debt before we left our corporate jobs. Iām sure others have different comfort levels and good reasons for maintaining mortgages, but zero debt is the basis of SWAN for us.
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To a seller, a cash offer can be more attractive then one with a mortgage. We had a sale fall through because the buyers couldnāt get a mortgage. It cost us time (although we werenāt in a hurry). Cash buyers can provide bank or brokerage statements with their offer as proof of ability to pay.
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It depends on the person.
If you can get a low interest rate, low enough that you can assure a higher investing rate in something secure like muni bonds or a CD, go with a loan. But you can show assets - to let them know youāre a very secure buyer.
If you canāt, better to spend your cash - and if itās a competitive market, no doubt a home will prefer you .
I donāt know how people do it - but if Iām buying a house cash, Iāll have cash - I wonāt say I have $50K in cash but $500K in stocks - because what if the stocks go down. I think you should have the cash ready to go.
I think the answer to your question though is very personal.
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In hot areas near me, buyers routinely lose out to all cash offers. Sellers love cash.
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Do brokerage statements have to enough cash or can it be enough liquid assets?
This is how we got our cabin just as we were coming out Covid. There was a small bidding war on the property among four buyers. We ended up just a bit short of the highest offer, but the sellers accepted ours because it was cash and they wanted out quickly with no surprises.
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@Iglooo is asking if you need the cash on hand or can you just show assets - like stocks - which can quickly turn into cash?
Iād ask your realtor? Others may know.
If I was a seller, Iād prefer all cash but would understand the stocks can be turned into cash quickly. Still, you never know how the market will go - up or down - and impact that cash.
Plus, Iād think if someone didnāt have the money in cash, they might not be as seriousā¦because when you have a big expenditure coming up, as a general rule itās to have that cash ready to go.
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No, it does not need to be cash, but an āall cash offerā should show assets that are far greater than what they are offering, e.g. if the buyer is offering $700k, than they shouldnāt provide a brokerage account statement with say $720k in it on the date that itās generated and expect that to be a strong offer for the seller to consider.
This is because the seller must know that the buyer can (and will) follow through. Market fluctuations are such that a brokerage statement like that would really be no guarantee of the funds being available if thereās even a slight market drop after the seller accepts.
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I found thisā¦ FDIC's How Money Smart Are You?.
What Funds Qualify As POF?
There are several types of documents that qualify as proof of funds. In some transactions, a simple printed bank statement can qualify. Additionally, a certified financial statement or a copy of a money market account balance may also qualify. Other times, you will need a letter from your bank or financial institution that states the exact amount of accessible or liquid funds that you have available.
Itās important to note that your funds must be liquid to qualify. This means that mutual funds, life insurance, another personās bank account, shares, bonds or proof of other possessions do not qualify as POF when youāre trying to buy a house.
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I am also wondering about an asset reduction mortgage, to avoid capital gains tax. Will be seeking info on this. Cash is a help on the market, and it seems easy to provide proof of funds.
Can you explain?
I looked it up but it doesnāt mention capital gains. What Iām reading about is asset depreciation. I donāt see anything that says asset reduction.
I know you get $500K (for a couple) tax free - but thatās not from what you paid. You can add improvements (you changed things or added blinds, etc.) I believe to your initial cost basis.
Not familiar with this - hoping you can share more or a resource.
Thanks
Is it also known as asset depletion mortgage?
āWith an asset depletion mortgage, your monthly āincomeā is calculated by dividing your total liquid assets by 360 months (the duration of most mortgage loans).
In this way, you can prove you have enough money to cover the loan even without regular income from employment.ā
Thanks - thatās what I read - but I donāt see anything on avoiding capital gains that @compmom mentioned?
Are you aware of any info on that?
I just have 2 or 3 (Not sure) mortgage payments leftā¦sad as it is, Iāll feel naked without it.
IF there is a choice between no mortgage, and paying cash by selling a lot of stocks (with low cost basis) and an asset depletion (or whatever it is called) mortgage, I need to do the math on interest on the mortgage vs capital gains tax for stocks sold.
It also depends on the time frame. I am older and retired, and still supporting kids, so rather than depleting assets now I was thinking of looking into an asset depletion mortgage for now so I can help the kids, and once they are supporting themselves, I could pay it off.
I have avoided debt my entire life!
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ohhhhhh - capital gains selling the stocks!!!
I thought you meant selling one home to buy another.
Is that like a reverse mortgage?
Wow - I have a lot to learn!!
I donāt have a house and am retired so cannot get a mortgage the usual way.
No not like a reverse mortgage. You have to own a house to get that 
I am renting and looking and would have to pay cash and recently learned of this asset depletion mortgage. I am going to investigate. When my mother died, there was no step up for stocks, so cost basis is from the 1930ās!
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When our first buyer for our home fell through (which was our highest offer), a second buyer (who had made a lower cash offer at the time we accepted the first buyer), came back with a higher all cash offer. They included with their offer some bank and brokerage statements giving their total balances (but considering the amount of info on the account statement that was blacked out it could have belonged to anybody and have any kind of holdings).
The contract said the sale was not contingent on them getting a mortgage, so they could not back out if they did not. That made it a ācash offerā. However, they did take out a small mortgage, unbeknownst to us until the closing. My lawyer was not worried by that, if they had not been approved for that mortgage, they would have had to go ahead with the purchase using only cash.
So the key here is what you put in the binding contract. If you donāt have a mortgage contingency than the seller will consider it a better offer than somebody with a mortgage contingency.
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