When purchasing a home, there are a lot of factors to consider. The location, condition of the property and the budget. Especially the budget or financing that you will use to purchase your new home. There are options such as Mortgage or cash payments. But which one is better? Well here are the benefits of buying a house using cash and using a mortgage loan.
Benefits of Cash Payments:
- Sellers Prefer Cash Payments
Sellers are more entice when you offer cash for the property. Why? It’s faster to close the sale because they don’t have to wait long for any mortgage approvals and not much paperwork to do. It is not time consuming and the transaction can easily flow through the next step of the process.
- No Interest , No Closing Cost
If you pay cash for the property, you don’t have to pay any interest charged by the loaning company and any closing cost fees such as appraisal fees, origination fees – origination fees are charged upfront by the lenders when processing a loan application. You don’t have to pay for any of those and other closing fees that can be charged by the lenders and the assessing team.
- Third on the list, You can Purchase the Property at a Discount
When the property is being purchased through cash, the seller would often give a discount or you can haggle at a discounted price. Since there won’t be any additional charge or closing fees, seller would offer the property at a lower price.
- Liquidity Issue
When purchasing a property via Cash, however liquidity would be an issue when you are to sell that property or in case of an accident or a major renovation has to be done. A liquidity is the ability to sell quickly without reducing its price. Since an assessment on the property and in your credit score was not made – which is normally conducted during mortgage approval.
Now the Benefits of Paying through Mortgage are:
- Tax is Less
Since you filed a loan to purchase a property, less tax will be charged from the purchase unlike paying the property for cash. If you’re paying through mortgage they will not charge you more on tax since other closing fees and origination fees are already charge on you.
- Mortgage Approval
However, since mortgage loan will be used as a financing source it is subject for approval. The loaning company would have to conduct an assessment on your credit history and credit score. They have to assess on how you will be able to pay for the interest or pay monthly. They have to check of you will be capable of paying the loan and won’t encounter any issues during payments. They would also have to assess if in case of emergency will you be able to come up with the money to pay the loan or not.
All in all, I’d say both has their own advantage and disadvantages. It is still your own preference and financial capability on how you would finance your purchase.
Credits and Source: — ” Thank You” —
Buying A Home: Cash Vs. Mortgage Gina Roberts-Grey