Should I pay up front or go for a mortgage?

Buying a home is the biggest investment for most people.  Everybody dreams of buying their own home at some point in their life. Real estate can be tricky and expensive, especially when you have never made the purchase before.  Some people have no choice but to take up a mortgage, but for others saving that kind of money can take a couple of years. If you are rich enough, you can pay an upfront fee of the home you desire.  For people who have been saving the money for years, there is always the debate on whether to pay the fee upfront or purchase using a mortgage loan.

Here are the comparisons between paying cash and mortgage

Mortgage; pros

Mortgages make payment easier if you can’t save enough money from your salary to purchase a house. With the right plan and a professional’s advice, making the monthly mortgage payments won’t be so difficult. The lender decides the payments depending on your salary and commitments. You have the freedom to choose from several mortgages from different lenders. With the help of a professional, finding the right lender will be easy.

The cons

Some lenders impose unbelievably high interest rates depending on a number of factors. At the end of a mortgage payment, you may find yourself paying off much more than you initially borrowed. If you have a poor credit score and a low income, you will receive a very low mortgage rate with a high interest rate. Some lenders will impose additional fees and hidden costs on your loan without your knowledge. Extra payments on mortgages like legal fee, penalties and interest rates will weigh down your monthly expenditure.  Mortgages will keep you in debt for a long period of time, especially when the monthly instalments are set at the minimal.

Straight up cash; pros

There are a variety of reasons you should use cash to pay for your home. Home sellers offer major discounts to people who buy their home upfront. Real estate agencies have a liking for people who pall the full amount at once. Clearing the payments means that you won’t have to worry about monthly payments and long debts. You will also get the title deed immediately you pay for the home. The whole process of buying a home is made easy when you don’t have too many legal documents and loan payments to deal with.

The cons

Paying the house in full also has its downs. It may leave you broke for a long period of time. Buying a house involves more than just paying for it; you will need to higher lawyer, a real estate agents, and home inspectors among other professionals. If you use all your money in buying a home, you will have none left for emergencies. Also, there is no guarantee that the house you buy with direct cash will appreciate in value fast.

The final word

If you have enough money on your account, and you are sure you can save the same amount fast, buying a house with cash can be the best choice for you. If not, you can use the money for other businesses and clear the mortgages using the profits from your business.