Mortgage vs Cash – An Analysis That Can Help Any Home Buyer
Yes, the vast majority of home buyers will need to take out a mortgage when purchasing a home out of sheer necessity, but there are circumstances when paying cash is also an option. You might already be asking yourself why we’re bringing this up since paying cash for a home is only relevant to a very small percentage of home buyers. Well, the answer is simple, and it’s one that we, at Accunet, consider an integral part of our job – to educate.
Learning the pros and cons of purchasing a home in cash versus taking out a mortgage will ultimately lead to a better understanding of how your mortgage works, and that’s something that all home buyers can benefit from.
On the surface, it’s understandable to think that if you can afford to pay in cash then you should. There isn’t as much paperwork, a cash offer can be more enticing to a seller and you may even get a cash discount. Additionally, if you pay cash then you won’t have to pay interest over the duration of the loan.
This is true, and for some home buyers this can be the best option, but just because you can technically afford it doesn’t automatically make it the best choice. For instance, if you pay cash on a $200,000 house, that is a lot of money out of pocket that could potentially be used for other investments, like stocks or bonds, that could earn money over time. Regarding interest, if it’s your primary or second home you can deduct your mortgage interest payments from your taxes.
Being able to deduct interest payments on your taxes and keeping a healthy liquidity of your assets are certainly factors to consider, but one of the most important aspects to consider when making this decision is your cash reserves. If you have drained your savings in order to pay for your home, you may be putting yourself at risk of not being financially stable if an emergency occurs.
In the end, there is no cookie-cutter answer to whether or not paying cash or taking on a mortgage is best. There are pros and cons on each side of the argument, but understanding how it can affect you is the first step. As long as you’re educated on both sides, you should be able to make an informed decision based on your needs and financial standing. And if you still have questions, our team of expert loan consultants at Accunet Mortgage are here for you.
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