All personal finance gurus tell us to avoid debt whenever possible. So what would be our logical choice- to buy a house with cash entirely or putting down a good amount to avoid the massive debt? Is mortgage the best option for your financial situation?
Keep reading to know the difference between paying with cash and taking a mortgage to buy a home.
- With cash payments, there is no interest on the loan and any closing costs.
- A mortgage provides tax benefits in some cases, and the buyer saves more in the bank to use when needed.
- Decide based on your financial situation and profit margins in the long term.
Advantages of Buying with Cash
If you pay cash, there are no mortgage origination fees, appraisal fees, or other charges required by lenders to evaluate buyers.
Some sellers prefer this payment option as they don’t have to worry about a buyer walking out due to a denied loan. It enables quick cash sales as compared to the one involving mortgages.
Advantages of Buying with a Mortgage
Some buyers may not want to spend a lot of cash to purchase real estate; therefore it might make sense to go with the financing. The buyer could become short on money if sudden repair and renovation costs arise down the road.
Being in a humble financial condition can limit your options while selling the home bought with cash. You may not have sufficient cash to put down a deposit on the new home.
Mortgage provides us flexibility, and cash buyers need to evaluate their wealth before parting away with a large chunk of their savings. Leave yourself plenty of liquidity to avoid stress later.
Usually, mortgage interest payments are tax-deductible, so check in with your lender regarding this. However, with interests, we pay more that adds up over time. The investment savvy individuals often take out a mortgage and invest the cash for profitable returns.
In some cases, having a mortgage can protect you from some creditors. Most states give consumers a certain level of security from creditors regarding their house.
Despite the value of the house, creditors cannot force its sale to settle their claims. The homestead exemption, however, doesn’t prevent a bank foreclosure if the borrower defaults on their mortgage payment.
Not having a mortgage could cancel a homestead exemption if the borrower lands in serious debt in the future.
Property Solutions Group real estate experts suggest making a choice based on your financial goals. The best option is the one that provides a greater return on your investment.
If you prefer acquiring a house with a loan, plan your finances around the principal and interest payments each month. While paying cash, consider the ongoing costs like property taxes, homeowners insurance, homeowner association, and other fees required each month as a homeowner in your state.
If you plan to sell your home before placing the deposit for a new property, contact Property Solutions Group. Being a verified house buyer in MD, we can give you an instant offer!
Many of our clients ask ‘I can’t afford my mortgage and want to sell my house, what should I do?’ PSG consultants can evaluate your property as per the details mentioned in the application form, and reach out with a fair cash offer. There is no closing cost or commissions, so you walk out with the full selling price. It could help you buff out your existing savings or put down a decent deposit for a new home. Contact us here.