Advantages of financing your home vs. cash
We all know that this year has been a hot one for the housing market. Many people became new homeowners and almost 30% of home purchases this year were made with all cash according to the National Association of Realtors. Cash may present home buyers with unique advantages, but financing is still a great option for many. Read on to learn about these advantages and see what may work best for you.
Pros Of cash
If you’re in the position to buy a home with cash it could be more beneficial than financing. Here are a few reasons why.
- Owning your home outright – as long as you continue to pay your property taxes, foreclosures are less of a worry. This also helps keep your credit score stable, while a loan could possibly lower your score.
- Saving! – Not having a mortgage means not having to put a big chunk of your money away each month for monthly payments. This also means you could save hundreds of thousands on interest rates as well!
- Beating out competition – Many sellers prefer a cash buyer because this generally means a faster close. A buyer who is financing has to move on the lender’s timeline and that can be quite lengthy. In this competitive market with a seller who has many offers, the speed and ease of a cash buyer definitely can make you a more attractive buyer.
pros of a mortgage
Just because you have the cash to purchase a home outright doesn’t always mean that it’s the best decision for you. With mortgage rates still being at an all time low right now, this is still a great option to consider.
- Improving your credit – Overtime a mortgage can greatly help your score. Credit bureaus like to see a diversity of debt, this means having a variety of credit cards, a mortgage, and a car loan can be beneficial as long as you’re making your monthly payments on time.
- Grow your money – If you decide to save your current cash and get a mortgage this could open opportunities for ways to grow it. You can invest this cash in stocks or other investment types.
- Interest can be tax deductible – Since you are already paying interest on your loan you can make money in the long run when you file taxes each year. If you itemize, your interest can be included in your deductions, earning you money in the long run.
overall
When making the decision to go all cash or finance you want to consider all of your financial goals. If you have a family you may want to consider college savings or retirement goals. If you have the cash readily available and are able to also pay the taxes, fees, and maintenance costs. Go for it! But if you only have enough cash to cover the cost of the home and are not ready to take on additional costs or want to save, a mortgage may be better for you. Always talk over your decisions with your financial advisor as well as your realtor.
