Buying a home comes with many different variables from the type of home you wish to buy from the way you intend to finance your home. Majority of people tend to opt for getting a mortgage to pay for their home; however, paying cash for your home may seem very appealing. When you have the finances to make a cash payment for your home, you are eliminating the need for a mortgage and the fee’s and interest that associated with obtaining a mortgage. There are many benefits to paying cash for a home as well as some cons, the decision to pay cash for your home more related to the of life you are living.
Each month the majority of homeowners pay a mortgage on their homes with an interest rate. Mortgages usually allow people to afford homes they otherwise wouldn’t be able to have, however being in a position to pay cash for your can give you the freedom from not having to pay mortgage and interest, saving you almost double the amount of money if you had obtained a mortgage. On a $500,000 home at an interest rate of 4% over a 30-year loan period, $412,000 will be paid in just interest, bringing the total cost of the home to $912,000. When numbers are laid out, it makes it understandable why paying cash for a home has an appeal.
One of the frustrating aspects to home-sellers is waiting on the potential home buyers financing to be approved. There have been many occasions where everything was going smoothly, and then the home buyers financing fell through. When a potential home buyer is paying cash, everything changes, homeowners really like cash homebuyers because usually, the sale of the home is a lot quicker than it would have been. Paying cash for a home also gives you the ability to negotiate a lower price on the home from the homeowner. Usually, homeowners don’t mind lowering the price of the home if it is a cash buyer because they have less headache to deal with and have more guarantee that the transaction will be executed without any problems.
The situation we are in currently, may not be the case 5 or 10 years from now, no one can say for sure what the future holds. If you decided to pay cash for your home, you have spent a significant amount of money that may be needed in the future. Paying cash for your home also does nothing to build on to your credit score. Even if your credit score is excellent now, it may not be in the future. If you don’t have a history of paying on a mortgage,(which adds to your credit score) it can make it challenging to secure a loan in the future if issues arise.