The first and foremost question that a home buyer needs to answer is how to arrange the payment amount? Whether a buyer should pay in cash or consider the mortgage route. Both of these payment modes have specific advantages and disadvantages, and a prospective buyer must know about the pros and cons of each payment method. Experts suggest a balanced choice of having both components including cash and mortgage to avoid heavy debt and maintain a good financial backup for other expenses as well.
Here are few benefits of both payment methods that can help homebuyers in deciding the best mode of payment to own their dream home.
The biggest benefit of cash payment is that homebuyers need not pay any interest on the borrowed amount as well as other closing expenses. Banks and lending institutions charge several other fees for mortgage amounts such as processing fees, appraisal fees, etc. apart from interest on the disbursed amount.
One should also remember that the higher the amount of cash invested towards the house, the greater is the homebuyer’s equity and ownership in it.
Mortgaging a property also has several benefits, especially for those homebuyers who don’t have enough cash amount to pay. Mortgaging enables homebuyers to have sufficient financial stability or cash reserves for concurrent future expenses.
Both modes of payment have their respective advantages and disadvantages. Also, the choice depends on several factors such as availability of cash, monthly income, concurrent expenses, and financial stability of an individual buyer. Apart from that various calculations based on income tax deductions, interest rate benefits, investments and cash reserve requirements also impact the decision of payment for home buying.
*Note: Cash in this article is referred to as savings that have been accumulated by the homebuyer over the years
Take the first step to home ownership with HomeCapital, get eligibility and in-principal sanction letter in one minute.
Click to get started.
Listen to our podcast
Find projects based on your interests
Calculate down payment assistance amount
Sign up and make the most of our member benefits today.
Join Community