If you have cash burning a hole in your pocket, you might be thinking about purchasing a home. Still, one of the benefits of having money is not having to spend that money. If you have enough money to buy a property in cash, you're probably in the position to get a mortgage as well. Getting a mortgage may not be a bad idea, even when you consider the interest.
Mortgage Interest Isn't That Significant
Consider the cost of taking out a mortgage. Most mortgages are going to have an interest rate of about 4.5%. However, most investments make 6% or more in returns, long-term. You could be sacrificing more than 1.5% of growth by not taking out a loan, in interest alone.
There's also more to consider. Putting that money into a retirement account means you won't have to pay taxes on a portion of your income, thereby saving you even more money. Further, you aren't paying the full cost of your mortgage interest either, because mortgage interest is also not taxable.
Having Cash Gives You Options
If you put all your money into buying a home, you won't have that cash at hand if an emergency occurs. Mortgages are one of the very few areas in which you can leverage a significant amount of debt, in general. Doing so offers you more freedom. If you purchase a home for sale with a mortgage, you can spend your cash on improvements and renovations. Conversely, if you buy a home in cash, you may not be able to qualify for a loan to renovate the property, as renovation loans are much harder to get.
A Mortgage Offers Some Protections
If you're purchasing your first home, you should be aware that your mortgage lender is going to advocate for you to a certain extent. More specifically, they will advocate for their investment. A mortgage lender isn't going to let you purchase a home that is extremely overvalued or a home that cannot be lived in (at least, not intentionally). If you're buying in cash, you may not be as diligent.
Before you start looking for homes for sale, you may want to review your financial situation. Once you're done with that, you can contact a real estate agent and begin the hunt. One thing is certain: being able to purchase a home in cash still puts you in an excellent bargaining position, but it's also an option you don't need to use.Share
24 July 2018
Have you recently found out you’ll soon be moving to a new location? Perhaps, your employer is transferring you to another branch of the company in a different city. Or, you may need to move near a family member in order to take care of him or her. Regardless of your unique situation, you might worry you won’t be able to find a wonderful place to live in your new city on your own. Consider hiring a reputable real estate agent to help you with your house search. This professional should have in-depth knowledge about your new area. On this blog, I hope you will discover the many advantages of hiring a real estate agent during an unplanned move. Enjoy!