One of the essential things included on the wishlist of every person is to have a beautiful house that they can call their own. Whether it’s an independent house, an apartment, or a villa, a house is not just an important part of every individual’s life, but they also considered it as a symbol of their status in life. Also, owning a house can give extra income, by either utilizing the home equity or by collecting rent for it.
However, a house is also one of the hardest things to possess. You can choose any available financing methods to purchase your home. One of the most common ways is by mortgage, but other people also want to purchase their house by paying in cash. In the face of increasing interest rates and tighter lending restrictions, more people skip the mortgage method and opt for paying cash for their dream house.
Here is a short list of the advantages and disadvantages of buying a house with cash.
Advantages of Purchasing a Home with Cash :
● No need to pay interest to the bank
Some first-time home buyers think that they will only pay the price of a home when they choose to go for a mortgage. They don’t know that they also need to pay the interest rate. So if you have money to close the deal, you will surely be saving thousands of dollars in the long run.
● The process of purchasing the house can be a lot faster
When you apply for a loan, it also means you need to deal with the bank and file tons of paperwork. And let’s say you have an approved mortgage, you still need to manage the closing process by filling out more forms. So, purchasing the house by cash will let you avoid these hassles.
● Your credit won’t matter
What’s good about paying your new house with cash is that the seller doesn’t care about your credit history. In the bank’s eyes, you are less credit-worthy just because of those past mistakes, but it is a different story when you hand over a nice pile of cash to the seller.
Disadvantages of Purchasing a Home with Cash
● You will miss out the tax advantage
For many homebuyers, the tax treatment of mortgage interest is one of the substantial incentives they can get. But, purchasing a house using cash will not give you any tax deductions.
● Less amount of liquidity
If you have a mortgage, you have more cash that you can use for other investments. It’s not also a wise decision to place your liquid assets into purchasing a new home with money since it’s more difficult to free up that money whenever you need it. When you decide to buy a house directly, it is important to make sure that you still have enough cash for emergencies.
● Increasing home values is not a guarantee
House rates are getting higher, and in some markets are at all-time high. And people expect that it will continue to increase if at a less great pace this year. However, back in 2008, the housing market crashed, meaning, rising home values in real estate is not a guarantee.
In today’s marketplace, purchasing a house using cash is becoming more common, and based on the reasons stated above, it is pretty obvious why. It provides home buyers with some considerable benefits if you can only secure the first cost. However, it is also a huge financial commitment, and it restricts liquid assets in an utmost way.
If you can purchase a home directly and can still sustain sufficient cash, it might be an excellent financial move. But if you’re not convinced yet, you can consult real estate institutions like Rose & Jones to provide you other options and help you decide.