A quarter of all San Francisco sales in San Francisco are financed with cash, and I’ve represented my share of cash buyers this year. But it may be a sound financial strategy to take out a mortgage on the property after you close escrow. The process is called “delayed purchase financing.”
There are a few benefits when you do this. Most importantly, if you obtain a mortgage within 90 days of your escrow closing date, you’ll be eligible for the mortgage interest deduction. Additionally, you may want to regain some liquidity and stash the money in investments that have higher returns than what you pay in mortgage interest. And of course, you might also be able to use the funds to purchase another property.
With only a short time to go between now and the end of the year, you may be able to get yourself some negotiating power by paying cash for a property. Sellers eager to close by December 31st may be more flexible on price, particularly if there’s not much competition for their properties.
In the end, the interest deductions may be worth thousands of dollars over the life of the loan. So you may want to consider getting preapproved for a loan, even if you do have the cash to make your purchase now.