Should You Buy a Home With Cash Or a Mortgage?
One of the main decisions every property buyer has to make is whether to buy the home with cash or get a mortgage. A mortgage represents a significant debt that can be part of your life for decades. However, as home prices increase much faster than incomes, buying a house with cash is increasingly challenging.
Each choice has its pros and cons, which you will have to weigh. There is a lot to consider when you are considering whether to buy a home outrightly or finance it, including:
Can You Afford It?
The first consideration you will have to make is whether you can afford to buy the property in cash. You should probably buy the home outright if you have enough money that you have expressly set aside to purchase real estate.
However, if you have to sell something or take cash from elsewhere to afford the house, a mortgage may be more affordable. According to Home & Money, you should not break the bank to buy a house. A mortgage makes buying a home more affordable for those without the cash to buy it though you will pay more in the long run.
The payment will depend on your ability to earn an income and pay back the loan, but you can buy a home you otherwise could not afford with a mortgage.
Attraction To Sellers
When buying a house, you have to be as attractive to the sellers as possible. The fact is that buyers who are ready to buy a home with cash are more appealing to sellers than those who want to finance the purchase. Financing a house can be a long and complicated process that can fall through at the last minute, which home sellers do not want.
Cash-ready buyers present an opportunity to buy the house quickly and without any hassles. Therefore, if you have the option to do both, know that sellers will be more likely to sell to you if you have cash.
You should also consider the closing process when buying a home using cash or a mortgage. The closing process will be much easier if you pay cash instead of a mortgage. The average closing process when buying a property via mortgage is about a month, whereas if you pay cash, the process will take about a week or two at the most.
You need to send your mortgage lender many documents, elongating the process. These documents will be absent if you buy the house with cash. You also have to wait for the lender to underwrite, process, and approve your loan, which can take time.
If you buy property as a self-employed individual, freelancer, or earning an income unconventionally, it can take even longer.
The closing process will be cheaper if you buy the house with cash as there are no costs and fees that come with a mortgage.
Owning The House
The most significant benefit of buying a house outright is that you completely own the property as soon as the transaction is complete. As long as you make all the other payments associated with homeownership, such as property taxes, the house will be yours.
On the other hand, if you buy a home with a mortgage, the place only becomes yours after you finish making the payments which can take decades. If you fail to pay the lender, they can foreclose on and own your property.
You have to seriously consider your options when purchasing a property, including whether to pay cash or use a mortgage. When all factors are considered, buying a house with cash is better. Your money will be tied up in the property, and you may lose some tax advantages, but it is the better choice in the long run.