When we decide to become independent or start a family, acquiring a home is one of our main projects, however, the question always arises: Is it better to take a mortgage or pay in cash? This decision will always depend on the financial liquidity with which we have to pay in cash, as well as the interest rates that are applied to the financing that they can grant us.
On the other hand, when we opt for the alternative of buying a property in cash, we have the benefit that we can pay up to 35% less, compared to what we would pay when applying for a mortgage.
In this sense, it is essential to evaluate which of these two options is better to obtain the home of our dreams, without becoming undercapitalized when making this important investment.
In the following article, we will show you what are the pros and cons of getting a mortgage or paying in cash in property investment
, which will help you decide which alternative is the best for you.
Advantages and disadvantages of acquiring a property for financing or cash:
The decision to take a mortgage or pay in cash will always depend on both the state of our finances, in terms of economic liquidity, and the interest rates offered by the bank that will provide us with the mortgage loan.
These two scenarios will always be decisive when choosing the option that can bring us more stability and tranquility, since, although buying a home is a very important investment with great value, it does not have to be a reason to destabilize the entire balance of our economy.
Based on this fact, the banks have made available to their clients the possibility of obtaining mortgage loans that allow them to acquire the house or property they want, without having to take all their capital and invest it completely, leaving their accounts at zero and with the concern if in the future they will be able to have an important financial backing that will be their support in the face of any eventuality.
However, mortgages can also become an imminent concern for the family, so many people prefer to choose to cancel the full amount of the cost of the house they want, to have the peace of mind of not having debts that there is no assurance that they can be paid in the future.
In this way, when we talk about the advantages and disadvantages that exist when paying for a property in cash, they stand out:
- When paying for a property in cash, you will not have to pay any additional expenses such as interest, mortgage formalization, or commissions.
- When you avoid paying commissions, you save a percentage on the demanded capital, since these commissions cover all the expenses that the formalization of a mortgage entails.
- You will save a significant amount of money by not having to pay month after month, the interest payments that are established at the time of contracting a mortgage loan.
- Canceling the purchase of a home in cash will help you get better negotiation prices for the property, where you can get a discount of up to 20% on the published price.
- Having all the savings or a large part of your capital to finance the purchase of a house can mean a loss of financial support for the future.
- If we do not have an amount of money according to market prices for the property we want, we will have to choose to buy a home with fewer benefits than we expect.
On the other hand, regarding the advantages and disadvantages of applying for a mortgage we have:
- Buying a property through a mortgage loan will allow you to have adequate financial fluidity, with which you can invest in other assets, pay for different types of expenses related to the property or simply enjoy greater financial liquidity for a better quality of life.
- Since the loan entity grants up to 80% financing according to the value of the home, you will not have to contribute the entirety of the purchase, but you can combine your capital with the amount of money financed in the mortgage loan.
- One of the reasons why people have the doubt of whether to mortgage or pay in cash is due to the interest rates and payment times offered by loan entities, which in some cases are difficult to comply fully, on all for those with an unstable economy.
- Mortgage loans are obligations that are contracted for the long term.
- The buyer must pay loan origination fees in order to formalize the mortgage.
- The ownership of the asset is not exclusive until you pay the mortgage loan in full
Mortgaging or paying in cash for the home we want is a decision of great value, so we must identify and analyze very well what are the points for or against each option in order to choose the one that brings us the best benefits.
Decapitalizing ourselves is not a feasible option, even more so when we are embarking on a new path either as an independent adult or as a person in charge of a family, so the options we have must be explored properly and choose the one that best suits our plans in the present and the future.