When purchasing a new home, you're faced with a lot of decisions.
One of these decisions is how you're going to finance the home. The Truth About Mortgage discussed mortgages versus cash, so let's weigh out these options with TAM’s guidance.
Buying a home with cash can be beneficial if you're able to afford it. If you can afford it, you won't have to worry about paying any interest that comes with a mortgage, or make any principal payments, pay Investor fees or pay an appraisal fee.
Paying with cash doesn't eliminate all recurring costs, though, homeowner's insurance, property taxes, and possible HOA payments (depending on where the property is located) are all costs that come with purchasing a home, regardless of how you pay for it.
Another benefit to paying for a house with cash is that it is a strong negotiating tool, and can result in a lower purchase price and a faster closing process, ensuring you'll get the home you desire.
However, paying with cash means you miss out on mortgage interest deduction and, because real estate is an liquid asset, you risk losing money when trying to sell.
Now, let's consider the perks of buying a home with a mortgage. Mortgages rates are very low, making them a valuable and easy choice, and the small down payments make them easy to afford up front. Mortgage interest is also tax deductible and allows you more cash on hand for whatever costs come up.
But mortgage interest must be paid, and it can accumulate to high costs. Plus, mortgage payments can last as long as 30 years, requiring you to make monthly payments for years. And if you fall behind on your payments, you risk losing your home (which you don't actually own with a mortgage). You also want to make sure you find the perfect mortgage for you, which requires an endorsement process that risks being declined.
If you are accepted for a mortgage, though, you have proved to be responsible with borrowing money and your credit score can actually improve if you continue the responsible financial behavior. You can also prepay your mortgage whenever you want, in most cases, and your money will be more liquid. Seeing as both come with advantages and disadvantages, don't forget that you can combine these options or utilize a hard money loan.
So, when buying a home, you have a lot of options for financing. Whether you decide to go with a mortgage, cash, a hard money loan, or a combination, AHL Hard Money Resources can help. Reach out to us to learn more about your financing options and say "hello" to a new home in no time.