Buying a Home in Cash vs. Mortgage
When it comes to financing real estate properties, people get confused about whether they need to purchase their house in cash or through a mortgage. This has been a never-ending debate among real estate investors because one group thinks it is a wise decision to pay in cash while purchasing an investment property, whereas the other group thinks it is more profit-friendly to purchase a property through a mortgage. There are a lot of considerations while determining between purchasing a home in cash vs. getting a mortgage scheme.
In this blog, we will discuss the pros and cons of each to help you decide the best method for you.
Buying a Home in Cash
While purchasing an investment property, being in a state of paying cash can be rewarding. Ultimately, you don’t need to carry a loan on your property investment which gives you an extreme relief as you are free from paying your mortgage payments. The strategy of financing you select relies on your financial condition. In case you have a roof over the head and sufficient cash, purchasing a real estate property with cash can be a way to go.
Purchasing a property with cash has many benefits for home buyers. Property sellers have no concern regarding the loan procedure with a cash buyer, which makes the entire process more flexible and quicker. Moreover, buying through cash means your equity is 100% of the house’s value. Hence, if you face financial issues, you can get some money from the property by borrowing a bank loan. You can start having a positive cash flow when you pay cash for purchasing a property because you don’t have to pay monthly mortgage payments. Not paying interests on your mortgage loan is highly beneficial for purchasing an investment property.
Buying a Home by Getting a Mortgage
Property investors who favor mortgage financing argue that higher returns are accomplished. The contention behind this argument is that investors make more money when prices appreciate since they get far more than the really invested capital. However, mortgage financing has also some benefits and cons. Examine them cautiously when you are confused between buying a home in cash vs. mortgage.
Getting a mortgage has more possibilities for higher returns. If you pay $100000 in cash for purchasing an investment property and it increases at 4% every year, then your ROI is gathering at $4000 every year. Now with a similar cash investment, there are possibilities for making a higher return. Mortgage interest can be deducted for a taxable income which is a benefit to home investors. Also, with mortgage financing, purchasing a home with no or little money is possible. You only require good credit to borrow a bank loan.
Both financing methods have their pros and cons and taking sides in this argument is tough. Every home buyer can select a strategy depending on the available resources when you know the best-suitable financing strategy. Contact Drew Mortgage Associates, Massachusetts mortgage company to find a better real estate investment opportunity.