Is It Better To Pay In Cash Or Get A Mortgage?

Dated: December 11 2018

Views: 124

Most people fear debt. So it is logical to think that if you have cash, it is better to buy a home with it to avoid massive debt associated with a mortgage.

 

Are you buying a home in Alaska and wondering which is better? To pay in cash or get a mortgage? Check out each advantage below to help you decide.

 

Advantages of buying in cash

 

1. More attractive buyer

 

A seller may take a cash buyer more in consideration versus those with getting a mortgage. Mortgage process is time consuming and there will always be a possibility that the mortgage application will fall through so the seller will need to start over.

 

2. Potential of getting a better deal.

 

If you are buying in cash, it puts you in a better place to bargain.

 

3. No hassles of getting a mortgage

 

There are tight standards of getting a loan. It takes longer and need a lot more qualifications, work, effort and documents to do so. You don't also need to abide by any lender's rules.

 

4. No need to make monthly payments

 

The burden of paying your mortgage each month for a long period of time is really a burden. The peace of mind of not adding any more bills to your regular monthly bills can be a great benefit. You will also be excused with paying interests to your lenders.

 

Advantages of getting a mortgage

 

1. You will have more cash in hand

 

You will have a better opportunity of diversification instead of getting all your savings in one house as your investment.

 

Also, having cash in hand means you can obtain cash almost instantly anytime you need it especially when selling a home takes time.

 

2. Higher potential return

 

If you buy your house with borrowed money, your potential return is higher assuming that the house increases in value in the future. For example, your 100,000 house value risen by 30,000. If you paid in cash, you have a $30,000 gain from your $100,000 investment. But if you paid only $40,000 in total including the down payments and monthly mortgage by the time your home value increases, you got a $30,000 gain from just the $40,000 investment, not bad right?

3. Higher financial leverage

 

If in any case, your home declines in value, you can lose less in mortgage than you may have if you paid in cash. This is just like the higher-potential-return scenario but in reverse.

 

3. Potential tax break

 

Homeowners with a mortgage receive a tax break on the interest paid to the lender.

 

So, given those advantages for each option, be careful to weigh the pros and cons especially when the market is extremely competitive.

 

If you need more help in looking a home to buy and whether to buy cash or through a mortgage in Alaska, call us at 907-720-4663 or (907) 570-6757, we can help.

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Homes by Vanna

Vanna has called Alaska home for the past 15 years. As a mother, real estate investor and previous business owner, Vanna brings many different perspectives when working for her clients. She has been a....

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