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Home > Home Buying Tips > Buying a House with a Mortgage or with Cash?

Buying a House with a Mortgage or with Cash?


At one time, homes were always purchased with cash. Gradually, over time, the American buying public has become much more comfortable with the notion of financing the cost of a home. As a result, almost all homes are now purchased through financing. The simple fact is that without the ability to finance the purchase of a home, most of us would never be able to attain the dream of home ownership. Still, if you actually have enough cash to actually purchase a home outright, you might find yourself in a quandary as to whether it would be better to purchase the home with the cash or finance it. There can be potential advantages associated with each option, so it is important to carefully consider the pros and the cons of each option before making a final decision.

Buying a House with Cash

Perhaps the biggest advantage associated with buying a house with cash, if you can afford to do so, is that you will avoid paying thousands of dollars in interest over the course of the mortgage term. When it is all said and done, you could save $100,000 in interest on the purchase of a $250,000 home. That's not all, either. If you are paying with cash you may very well be find that sellers are more willing to negotiate and will throw in additional concessions or may even lower the sales price.

Along with the staggering savings available when purchasing a home with cash, there is also the fact that it is just less time consuming and less of a hassle. When you are not financing a home, you do not have to worry about completing the mounds of paperwork necessary to become approved for a mortgage loan. This can potentially allow you to close much faster on the home. In fact, without the hassles involved with financing, you could close on the home in a week or two in some areas as opposed to months when you finance.

In addition, you do not have to worry about being tied down to a mortgage for the next fifteen or twenty years. If you are looking at having to send kids to college in the future or anticipating your own retirement, this can certainly be a big incentive for paying cash for the purchase of your home now if you are able to do so.

Buying a House with a Mortgage

There is no getting around the fact that the biggest advantage associated with buying a house with a mortgage is that it allows millions of people around the country the opportunity to purchase a home. Not many people have the financial savings to be able to pay cash for a house. For homeowners who plan to stay in their home for the long-term, there is the incentive of being able to recoup the increases if the home appreciates in value. While that might not seem likely at the moment, given the state of the current housing market, if you do stay in the home for several years and it appreciates in value, you will be able to take advantage of that increase in value whether you still owe a mortgage or not.

Also, by purchasing with a mortgage, you will be able to leverage your financial capabilities and possibly purchase a better or bigger home than you would be able to buy if you are limited solely to the amount of cash you have on hand. If you're looking up upgrade to a larger home or you are interested in buying into an area where the prices are higher, buying with a mortgage could be to your advantage.

As most people are aware, if you owe a mortgage on your home you are also able to take advantage of other benefits, such as tax breaks. At the current time, there is still a tax deduction available for mortgage interest payments. Keep in mind that the amount you are able to receive back in mortgage interest deductions is limited by your income.

Finally, keep in mind that using a mortgage to purchase your home is actually a good way to diversify your assets. If you plunk down all of your savings on the cost of a home, you might have little left in savings to assist you in the event of an emergency. On the other hand, if you use part of your savings for the down payment and finance the remainder of the home's cost, it allows you to keep more of your cash as liquid assets, which can be handy if you have unexpected expenses in the future


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