Carrying debt is always referred to as a bad life decision. So normally, it’s logical to think that purchasing a home with cash – or paying as much cash as possible into your home to sidestep the massive debt associated with a mortgage, is the best choice for your financial health.
Of course, it’s obvious that buying with cold cash will save you a lot of money plus other benefits, especially if you’re purchasing Brisbane house and land or other properties in similar prime locations. If you have the money, then buying newly build homes with house and land package option should be a top consideration.
Still, there’s a lot to consider when contemplating purchasing a home with cash versus obtaining financing via the traditional mortgage method.
Full cash payment
Cash can cut costs or win property bidding. Showing up with cash for a home removes the need to pay interest on the loan as well as many closing costs. When purchasing a house with cash, there will be no mortgage fees, appraisal fees or any other fees charged by lenders to the buyers.
Paying by cash makes your purchase offer more tempting to sellers. When in a competitive market, a seller is likely to take a cash offer over other offers (even higher ones) because they won’t have to worry about a buyer backing out due to financing issues. A cash buyer’s home is not leveraged, which means the homeowner can sell the house more easily regardless of market conditions.
A cash home purchase has the flexibility of closing faster. Especially when compared to one requiring financing, which could be attractive to a seller. Those benefits to the seller shouldn’t come without a price. Also, a cash buyer might be able to acquire property for a lower price and even receive a cash discount.
Mortgage sometimes make sense
Choosing financing option has several benefits. Even if a buyer has the ability to pay cash for a home, it might make sense to not put down everything at once to purchase real estate. Doing so may tie your hands down the road.
Cash buyers need to ensure to leave themselves plenty of liquidity. If the purchased home requires multiple repairs or renovations, it can become tough to acquire a home equity mortgage down the road as you don’t know how your credit score will be in the future, how much the property will then be worth as well as other factors that determine approval for the mortgage.
Moreover, selling a home bought with cash may pose a problem if the owners stretched out a lot to purchase it. If cash buyers choose to sell, they need to ensure that they will have enough cash reserves to put down as a deposit for the new home.
Depending on the stock market’s status, saving on mortgage interest by paying cash may not be financially prudent. You could be making less than that money might have earned had you just taken out a mortgage and invested the cash you didn’t spend on your house in other ventures.
To sum up, while paying cash brings a lot of benefits to the table, it’s still worth looking if mortgage option can work better in your favour. If you’re sure that you want to go down the cash payment option, it’s worth looking at Brisbane house and land or other properties in a different location. Talk with a property expert or your broker to get sound guidance based on your preferences.